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Formation of Contracts in International
Transactions: The Issue of Battle of the Forms
under the CISG and the UCC

Andrea Fejõs (Feješ) [*]
November 2006

ABSTRACT

The thesis deals with the issue of "battle of the forms" in international transaction. The phenomenon of "battle of the forms" occurs when both parties in the course of contract conclusion use there own standard terms that are usually incorporated into a standard form contract. Standard terms are designed to favor only one party, the party that makes their submission. Therefore, standard terms in the parties' standard forms will always collide; they will be in "battle." Traditionally, contracts are concluded after reaching a mutual agreement on all contractual elements. However, in transactions where the "battle of the forms" is involved, parties stay in disagreement over the conflicting standard terms If litigation arises two questions emerge: Is there a contract? If yes, what are its terms? The thesis seeks for an answer from the perspective of two respective documents: the United Nations Convention on Contracts for the International Sale of Goods (CISG) and the United States Uniform Commercial Code (UCC).

The CISG (Chapter I) and UCC (Chapter II) approached the issue of "battle of the forms" differently. The CISG left the issue unresolved lacking an explicit provision, while the UCC gave a complex solution that is subject to divergent interpretation. Art. 19 CISG and § 2-207 UCC are thus similar at one point: they both create confusion.

The thesis studies Art. 19 CISG and § 2-207 UCC in order to discover the current state at the battlefield of the forms taking an objective approach, showing different theoretical and more importantly practical solutions, using the method of legal analysis in conducting the research. The thesis also deals with the UNIDROIT Principles of International Commercial Contracts (UPICC) and the Principles of European Contract Law (PECL) that are useful for interpretative and gap filling purposes of the CISG, while in the interpretation of the UCC relies on Restatement (Second) of Contracts and Official Comments of UCC. The new § 2-207 in revised Article 2 UCC from 2003 is also introduced and studied.

One of the main focuses of the thesis is the common law 'mirror-image' rule that traditionally plays crucial role in contract formation and the 'last-shot' and 'knock-out' rules, methods that are most frequently applied in determining the terms of the contract.

Ultimately, the thesis gives a comparison of Art. 19 CISG and § 2-207 UCC employing the comparative method and surprisingly find that at overall, the two at first site completely different provisions, produce approximate practical results. In majority of the studied cases, despite discrepancies in the parties' standard terms, courts held there is a valid contract, provided the parties performed, and determine the terms of the contract by the 'knock-out' rule. However, this is only the global result. In practice due to inadequate regulation of "battle of the forms" in Art. 19 CISG and § 2-207 UCC, the battle can end on various ways. In the light of the above findings the thesis suggests a uniform solution to the issue of "battle of the forms" and advocates that at least a consistent application of present Art. 19 CISG and § 2-207 UCC should be achieved.


ABBREVIATIONS INDEX

ALI The American Law Institute
 
CISG United Nations Convention on Contracts for the International Sale of Goods (1980)
 
Cmt Official Comment on § 2-207 UCC by ALI and NCCUSL
 
PECL Principles of European Contract Law (1999)
 
Restatement Restatement (Second) of Contracts (1981) by ALI
 
NCCUSL National Conference of Commissioners on Uniform State Laws
 
NUCC Uniform Commercial Code (revised version from 2003)
 
UCC Uniform Commercial Code (1951)
 
ULF Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods (1964)
 
ULIS Uniform Law on the Formation of Contracts for the International Sale of Goods (1964)
 
UPICC UNIDROIT Principles of International Commercial Contracts (2004)
 
UNCITRAL United Nations Commission on International Trade Law
 
UNIDROIT International Institute for the Unification of Private Law
 
Code Uniform Commercial Code (1951)
 
Convention United Nations Convention on Contracts for the International Sale of Goods (1980)
 
Vienna Conference   United Nations Conference on Contracts for International Sale Goods, 10 March 10-April 11, 1980
 
Working Group Working Group on the International Sale of Goods


STRUCTURE

Table of Contents
Introduction
Chapter I - Battle of the Forms under the CISG
Chapter II - Battle of the Forms under the UCC
Conclusion

Bibliography

TABLE OF CONTENTS

Introduction
1.  Legal sources and methodology
2.  The 'mirror-image' rule in contract formation
3.  Formalization of modern commerce - the use of standard terms
4.  The different kinds of collision between standard terms
5.  The 'last-shot' and the 'knock-out' rules in determining the terms of the contract
6.  Limits and structure of the thesis

Chapter I - Battle of Forms under the CISG
I.1.  Is the issue of battle of the forms governed by the CISG?
        a)   One opinion: The issue of battle of the forms is not governed by the CISG
        b)   Other opinion: The issue of battle of the forms falls under the CISG
I.2.  Incorporation of the 'mirror-image' rule into Art. 19(1) CISG
I.3.  Exception from the 'mirror-image' rule or an implied inclusion of battle of the forms into Art. 19(2) CISG
        a)   A reply to the offer should purport to be an acceptance
        b)   Material versus immaterial modifications
                bi)   Material alterations
                bii)   Immaterial modifications
                biii)   Practical importance of the distinction between material and immaterial modifications
        c)   The offeror's reaction to the alteration, silence and objection
                ci)   The offeror is silent on the modification
                cii)   The offeror objects to the modification
I.4.  The legislative history of Art. 19 CISG
I.5.  The principal question: is there a binding contract?
I.6.  Battle of the forms after an oral contract
        a)   Forms intended to confirm the oral contract
        b)   Forms intended to replace the oral contract
I.7.  The terms of the contract: the 'last-shot' rule
I.8.  Contract terms determined by the 'knock-out' rule
I.9.  Alternative approaches to the 'last-shot' and 'knock-out' rules
        a)   Reliance on the parties' conduct in the resolving the battle of the forms
        b)   The 'first-shot' rule
        c)   The evaluation of standard terms separately, whether each satisfies conditions to become part of a contract
I.10.  Application of alternative sources for determining the terms of the contract on grounds of Art. 7 CISG, the UPICC and PECL
        a)   Battle of the forms under the UPICC
        b)   Battle of the forms under the PECL

Chapter II - Battle of the Forms under the UCC
II.A.  Formation of contracts via offer and acceptance
II.A.1.  Rejection of the 'mirror-image' rule in § 2-207(1) UCC
        a)   A "definite and seasonable expression" of acceptance
        b)   Exception to the main rule - an "expressly conditional" acceptance
                bi)   The Roto-Lith approach
                bii)   The Dorton approach
        c)   Analysis of Roto-Lith and Dorton and the prevailing approach today
II.A.2.  Some conclusions on § 2-207 (1) UCC
        a)   When is an acceptance "expressly conditional"?
        b)   A counter-offer or a proposal for contract modification?
        c)   The principal question: is there a binding contract?
II.A.3.  The terms of the contract (§ 2-207(2) UCC)
II.A.3.1.  Some observations on § 2-207(2) UCC
        a)   The offeror is the master of the offer
        b)   Merchants versus non-merchants
        c)   Additional versus different terms
II.A.3.2  Conditions for the reply containing additional or different terms to become acceptance
        a)   The offer expressly limits acceptance to the terms of the offer (§ 2-207(2a) UCC)
        b)   Material versus immaterial modifications (§ 2-207(2b) UCC)
                bi)   Material alterations
                bii)   Material alterations and fairness
                biii)   Immaterial alterations
                biv)   Distinguishing material and immaterial alterations in practice
        c)   The offeror's reaction on the changes, objection or silence (§ 2-207(2c) UCC)
                ci)   The offeror objects
                cii)   The offeror stays silent on the changes
II.A.4.  'First-shot', 'last-shot' or 'knock-out'?
        a)   The 'first-shot' rule
        b)   The 'last-shot' rule
        c)   The 'knock-out' rule
II.B.  Battle of the forms after an oral contract - contracts via written confirmations
        a)   Forms intended to confirm the oral contract
        b)   Forms intended to replace the oral contract
II.C.  Agreement by conduct (§ 2-207(3) UCC)
II.D.  A compelling need for revision of § 2-207 UCC and the new solution
II.D.1.  The reasons and process of redrafting § 2-207 UCC
        a)   Criticisms of § 2-207 UCC
        b)   Models for revision of § 2-207 UCC
                bi)   Search for the parties' "true understanding"
                bii)   Revival of the 'mirror-image' rule
        c)   The revision process
II.D.2.  § 2-207 of the revised UCC from 2003 - The new § 2-207
        a)   General remarks
        b)   Formation of contracts under § 2-204 and § 2-206 NUCC
        c)   § 2-207 NUCC and the terms of the contract
                ci)   Terms in records of both parties(§ 2-207(a) NUCC)
                cii)   Terms to which both parties have agree to- whether in record or not (§ 2-207(b)NUCC)
                ciii)   Filling in the gaps by terms supplied or incorporated under the NUCC (§ 2-207(c) NUCC)
        d) Is § 2-207 NUCC really "new"?

Conclusion
1.  Is the problem of colliding standard terms commercially irrelevant?
2.  Contract formation under the CISG and the UCC
3.  Determining the terms of the contract under the CISG and the UCC
        a)   Scenario 1: The acceptance was not made expressly conditioned on the offeror's assent- the application of § 2-207(2) UCC
        b)   Scenario 2: The acceptance was made expressly conditional - the application of § 2-207(3) UCC
4.  Contracts concluded other than by offer and acceptance
5.  Is there a uniform solution for the issue of battle of the forms?

Bibliography

INTRODUCTION

In a most common battle of the forms transaction, the buyer sends a purchase order that amounts to an offer to which the seller responds sending an order acknowledgment form that appears to be an acceptance but contains variant terms among the standard clauses, for example a warranty disclaimer clause, while the buyer's form contains express warranties. The question had not been touched upon during negotiations between the parties, but they reached an agreement on all other contractual elements. Not reading each other's form, parties perform their obligations under the contract they contemplate was validly concluded. The seller ships the goods which the buyer accepts and pays. However, when the buyer starts to make a use of the goods, the buyer notices they are non-confirming to the contract. On the buyer's notice the seller refuses to remedy the fault, pointing onto its warranty disclaimer standard clause and claims, alleging that the buyer accepted it by accepting the goods and paying for their price. But is there really a binding contract? And if yes, what happens with the conflicting terms? Which terms become part of the contract, the buyer's or the seller's or neither? These are the main issues the thesis will address.

The introductory part will. after introducing the legal sources and methodology, focus on the problem of battle of the forms. The traditional 'mirror-image' rule will be explained and the commercial reality, the use of standard forms in commercial transactions. The terminological confusion surrounding standard terms and standard forms will be explained. The introductory part is going to be finalized with the limits and structure of the thesis.

1. Legal sources and methodology

The present research will analyze the issue of battle of the forms and search for whether there is a contract and, if the answer is positive, what are its terms from the perspective of two respective documents, the CISG (Chapter I) and the UCC (Chapter II).

The CISG [1] was created under the auspice of UNCITRAL and was adopted on April 11, 1980 at the UN Diplomatic Conference held in Vienna.[2] It is a comprehensive document on international sales, containing both rules on contract formation and obligations of the buyer and seller.[3]

The CISG is applicable where a sale is international. Namely, when the parties' places of business are in different Contracting States of the CISG (direct application) or when the rules of private international law lead to the application of the law of a Contracting State of the CISG (indirect application).[4]

The CISG is an important commercial instrument due to its great success. As of July 17, 2006 68 states have adopted the CISG [5] including most major trading states. Today its Contracting States accounts over three-quarters of all world trade.[6] All the more, when the battle of the forms occurs in international transactions, the CISG's success might cause problems. The issue of battle of the forms stayed outside the regulatory scheme of the CISG and there is an endless disagreement among commentators whether the problem falls at all under CISG or whether the underlying national law should give a solution. However, the prevailing scholarly opinion is that it is better to apply the CISG and its Art. 19 CISG than the divergent national laws.[7] Art. 19 reads as follows:

      (1) A reply to an offer, which purports to be an acceptance but contains additions, limitations or other modification is a rejection of the offer and constitutes a counter-offer.

      (2) However, a reply to an offer, which purports to be an acceptance but contains additional or different terms, which do not materially alter the offer, constitutes an acceptance, unless the offeror, without undue delay, objects orally to the discrepancy or dispatches a notice to that effect. If he does not so object, the terms if the contract are the terms of the offer with the modification contained in the acceptance.

      (3) Additional or different terms relation, among other things, to the price, payment, quality and quantity of the goods, place and time of the delivery, extent of one party's liability to the other or the settlement of disputes are considered to alter the terms of the offer materially.

Art. 19 CISG deals with non-conforming acceptances in general and its primary purpose is not to settle the battle of the forms. Consequently, many important questions are left open and recourse to other general provisions on formation of contracts (Arts. 14, 18, 29 CISG) and on contract interpretation (Arts. 7, 8 CISG) is necessary. Moreover, international documents like the UNIDROIT Principles of International Commercial Contracts [UPICC] [8] and Principles of European Contract Law [PECL] [9] can and should be used in the interpretation and supplementation of the CISG. Both instruments have explicit provisions on the battle of the forms, the UPICC in its Art. 2.1.22 and the PECL in Art. 2:209.

Both the UPICC and PECL [10] are non-binding instruments, "soft" laws and are entirely applicable if the parties reach an agreement to that effect. More often they are applied as interpretative or as gap filling instruments. The use of the UPICC and PECL as gap filling instruments to the CISG is not without doubt. Missing terms are supplemented based on Art. 7(2) CISG, according to which, matters that are governed but are not expressly settled in the CISG are to be settled in accordance with the general principles on which the CISG is based. Therefore, the application of the UPICC and PECL is subject to two conditions: 1) The matter is governed, but not settled by the CISG and 2) The UPICC and PECL need to contain general principles on which the CISG is based.

1) Some issues have been deliberately left outside the CISG's scope to the competence of the non-unified national laws. The area for gap filling covers only matters that are covered by the CISG.[11] The scope of the CISG is generally defined in Art. 4 CISG. Whether standard forms fall under its scope is controversial, with the prevailing scholarly opinion that it does.[12]

2) The UPICC and PECL are instruments that contain general rules of international commercial contracts [13] and in any event they might be applied when the contracts are governed by "general principles of law.[14]" Further, in the preparation of the PECL and UPICC a wide range of legal materials from all over the world had been drawn up. None of the national legal system was a starting point, but the CISG had substantial influence on the rules relating to the formation of contracts. As a result most of the provisions of the CISG, UPICC and PECL are very similar, and Professor Lando even calls them the "troika."[15] Therefore, provided the battle of the forms is a matter that is governed by the CISG, the UPICC and the PECL can and should be used for finding solutions in cases at hand.[16]

Absent of an explicit provision on the battle of the forms, case law is also a helpful interpretative tool. The legal base for their application is Art. 7(1) CISG, stating that in the interpretation of the CISG regard shall be given to uniformity in its application. The set aim would be achieved if courts applying the CISG in one Contracting State would take into account a decision rendered in another Contracting State,[17] thereby developing a common interpretation.[18] However, the decisions rendered by national courts cannot be characterized as precedents, and in the absence of any control in the application of the CISG and legal tradition to that effect,[19] express references to foreign decisions on the same point have not been frequent.[20]

Another major legal source for analyzing the battle of the forms is the UCC.

The UCC is a model law and a joint project of ALI and NCCUSL.[21] It has nine Articles and its Article 2 is on Sales. Art. 2 UCC is widely accepted, it is enacted in 49 states out of 50 of the United States,[22] without any or with minor amendments. For the purposes of this thesis, the version of the State of New York will be used.[23] Though it is not an international instrument, its uniform character cannot be underestimated. In international sales transactions the UCC's application is limited being a Contracting State of the CISG provided the conditions in Art. 1(1) CISG are satisfied. Generally, its application is limited for gap filling purposes under Art. 7(2) CISG, as the applicable national law by virtue of private international law. However, it is used in commercial transactions in 49 states of the US and various territories and possessions [24]! Unlike the CISG, the UCC explicitly deals with the issue of battle of the forms in § 2-207 UCC that states:

§ 2-207 Additional Terms in Acceptance or Confirmation.

(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

(a) the offer expressly limits acceptance to the terms of the offer;

(b) they materially alter it; or

(c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

(3) Conduct by both parties which, recognizes the existence of a contract, is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract.  In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.

Art. 2 UCC was first promulgated in 1951,[25] and has been completely revised to meet the needs of modern commerce, reflecting recent development in business practice and accommodating electronic commerce, in 2003.[26] The amendments are overall modest [27] but § 2-207 UCC has been completely changed. Article 2 is a model law and has to be enacted by every state legislature. So far it has been introduced in two states but not yet become binding law in any state.[28] Hence, UCC from 1951 still governs sales transactions. Due this dichotomy of § 2-207, the thesis will focus on the present solution but will give appropriate attention to the revised version as well.

In the interpretation and application of the UCC, the Official Comments on 2-207 UCC [29] and Restatement (Second) of Contracts [30] are going to be relied on.

The main research methods that are going to be used are the legal analysis and the comparative methods. The thesis will most extensively use the legal analysis method, researching scholarly opinions, the statutory provisions (UCC, NUCC) and the provisions of international documents (CISG, UPICC, PECL) as well as the extensive case law. The comparative method is going to be used to a lesser extent in the argument but will be the principle method of the conclusion, where the solutions on the battle of the forms under the CISG and UCC will be compared.

After introducing the sources and methods of the thesis, in further discussion, the focus will turn to the battle of the forms, more importantly on the reasons and different settings the problem emerge in commercial transactions.

2. The 'mirror-image' rule in contract formation

The mirror image rule is a common law contract principle that requires a complete match between an offer and acceptance; it is also called the 'ribbon-matching' rule. A classical illustration of the rule is the 1915 case Poel v. Brunswick-Balke-Collender Co.[31] The seller made an oral offer for a large quantity of rubber. The blank spaces of buyer's purchase order have been filled by its agent, who inserted terms relating to a description of the goods, quantity, price, and delivery, but all identical with the terms of the offer. The purchase order form also contained printed clauses named 'Conditions on Which Above Order is Given.' One of the printed 'conditions' read as follows: "The acceptance of this order, which in any event you must promptly acknowledge, will be considered by us as a guarantee on your part of prompt delivery within the specified time."

The purchase order was dated April 4 and delivery was not to begin until next January. In January, the buyer informed the seller that the employee who had made the deal had no authority to effect the transaction. Because that defense was not successful, the buyer's attorney scurried to the documents evidencing the transaction and discovered the quoted printed provision in the purchase order. The defendant-buyer argued that no contract existed because, by the terms of the purchase order, the acceptance had to be acknowledged promptly and the seller had not done so. The requirement of prompt acknowledgment turned the acceptance into a counter-offer pursuant to the technical requirement that the acceptance must match exactly the terms of the offer. The trial judge held that the parties never intended the printed conditions to have any bearing on the closed deal they assumed they had made. However, the appellate court reverted to the traditional 'mirror-image' rule holding a response was a counter-offer creating no contractual obligation to the buyer.

It is clear that the buyer thought it was making a contract by sending the purchase order. The seller easily could have acknowledged the acceptance in the purchase order, but saw no reason to do so because it too assumed the contract had been concluded. It is also apparent that the seller was the typical merchant; it did not read the printed terms in a response to an offer any more extensively than merchants read them today.[32] The buyer intended to break the deal for other reasons, but when his defense was without success it invoked on the 'mirror-image' rule.

The 'mirror-image' rule relies on the traditional concept that an essential prerequisite for the formation of contracts is an agreement: a mutual manifestation of assent on all contractual elements.[33] The mutual assent towards contract formation has to be embedded formally into an offer and an acceptance which correspond in all aspects. Consequently, even minor changes invalidate the contract due to the lack of mutual assent.

Contract formation is governed by a set of formal and rigid rules. The offeror is the master of the offer therefore the acceptance has to be in a proper manner and by a proper medium. A clear and definite offer has to be followed by positive and unambiguous,[34] or pure and simple acceptance that totally confirms the offer.[35] A purported acceptance that contains changes to the offer is treated as a counter-offer, a rejection of the initial offer coupled with a new offer and not an acceptance.

3. The formalization of modern commerce - the use of standard terms

The 'mirror-image' rule works fairly well for transactions where every term is separately negotiated but is unsuitable in the era where face-to-face contact are rare, time is money and speed is an essential element of contract conclusion. Modern means of communication such as Electronic Data Interchange (EDI), telefax, e-mail, the internet have enabled transmissions of the information beyond the imagination of the traditionalists who shaped the law of the contracts many years ago, including the 'mirror-image' rule.[36]

In contemporary commercial contracts, pre-printed, non-negotiated terms become part of everyday transactions. Merchants generally do not speak of offer and acceptance. Their writings are called: purchase orders and acknowledgment forms, delivery orders, invoices, requests for prices, quotations, letters of intent, and many other different names with one common element: they all contain standard terms.[37] The documents in which standard terms are laid down may occur in different forms, under different names and with different content.

UNCITRAL researched the problem, and concluded, there is a difference between a document that parties to the contract can use as the contract itself, provided they sign the document and fill in clauses that require completion, such as those relating to the names of the parties, price, port of dispatch, quantity and description and a document which provides a list of clauses which the parties can incorporate or refer to in their contract but which is not supposed to constitute the parties contract. The former is referred to as a standard contract and the latter as general conditions, though the terminology is not consistent.

In practice there is a further distinction between standard contracts and general conditions. Standard contracts are printed on one or both sides of the paper. Due to limited space, they contain a small portion out of the total range of possible legal problems that might arise in the course of contract formation or its performance. The remaining terms that govern substantive obligations of the parties are found in trade usages or in the substantive law of some country, normally, in the law of the country where the party who drafted the standard contract has its seat or principle place of business.[38]

General conditions are not restricted to a single piece of paper; indeed, they often occur in a form of small brochures. They tend to be longer than standard contracts and govern most of the legal problems that may arise in the parties' contractual relation. They are "all-inclusive." Some general conditions are virtual codes of sales law for the type of goods in question.[39]

On the other hand, standard contracts usually have free blank spaces which parties fill in with individually negotiated terms as "special conditions" while the printed terms are the "general conditions" of the contract.[40] General conditions are terms which have been formulated in advance for an indefinite number of contracts of a certain nature, and which have not been individually negotiated by the parties.[41] US literature calls them "boilerplate" terms.

For the purposes of the thesis "standard term(s)" will be called the terms themselves, reflecting their non-negotiated, prepared in advance character. The terminology is going to be used whenever the term(s) itself will be in question, no matter of a wider commercial context, regardless if the term appears as part of a form contract or general conditions referred to or attached to the contract. The term "general conditions" will be used when referring to a set of standard terms that is incorporated into a separate document and is referred to or attached to the contract document. On the other hand, standard business forms, pre-printed form contracts with blank clauses to be later filled in with negotiated terms will be further referred to as simply "forms" or "standard forms". As standard forms contain a set of pre-printed standard terms, if both parties used their forms in the course of contract conclusion, the terms therein will be in a collision, the name of which phenomenon is the "battle of the forms". In practice, it is not always easy to distinguish whether the terms are contained in standard forms or in general conditions. Standard terms might be typed on different forms, like order and order acknowledgment forms but also on invoices and even on labels of the product. For this reason, in the thesis, battle of the forms will be called the battle of standard forms as well the battle of standard form on one side and general condition referred to or attached to on the other side and the use of general conditions by both parties. However, in practice most commonly standard forms are in battle.

"Standard form contracts probably account for more than ninety-nine per cent of all contracts now made. Most persons have difficulty remembering the last time they contracted other then by standard form; except for casual oral agreements, they probably never have. But if they are active, they contract by standard form several times a day … the contracting still imagined by courts and law teachers as typical, in which both parties participate in choosing the language of their entire agreement, is no longer of much more than a historical importance.[42]"

4. The different kinds of collision between standard terms

The use of forms and therefore their occasional battle progressively took over the marketplace.[43] Reasonable merchants use printed forms to make deals, and they disregard certain printed provisions therein.[44] However, the battle itself can take a variety of appearance. As in the course of contract conclusion, parties sometimes use general conditions but more often standard forms, the collision might be between standard forms, general conditions, and a standard form and a general condition. What is more important that the clauses in these documents can collide in many different ways. The most common are:

a) Parties printed forms sometimes refer to same crucial term but with a different content. The divergence appears in single clauses, like different arbitration clause, choice of forum, warranty or payment terms.

b) Quite often no obvious contradiction exists between individual clauses, when some term is found in the first form (offer) but not in the second, or vice versa. In this case, the collision can only be assumed, by supposing the silent party proposed the underlying statutory rules to be effective.

c) In some cases, at least one of the forms contains a general defense clause, stipulating that no contract will be formed unless the party accedes all of the terms found in the form and offers no others.

d) Cases where there is a prior oral agreement which parties later confirm with their writings that contain inconsistent terms.

e) Cases where parties do not use forms but send a wide variety of different communication messages and letters completed with oral negotiations. In this type of case, there is no pattern, or at least no continuous pattern of exchange of printed forms. One party can send a typewritten form and the other a letter in exchange. Parties may send printed forms that differ so substantially that the second cannot be an acceptance; then one party responds further with a letter or a typed form, yet they never write down their agreement in one document.[45] Often, from a number of different communications none can be identified as an offer and acceptance, but their sum reveals a conclusion of a binding agreement.

The battle of the forms evidences, the law cannot anticipate all possible practical situations.[46]There are many imaginable ways of collision and the common element of all the possible practical scenarios is the absence of a complete agreement, a mutual assent on all contractual elements.[47]

The 'mirror-image' rule and standardized contracts are in contradiction. The traditional rule requires complete match between an offer and acceptance, whereby the "match" and the parties' form of communication are equally important. In modern contractual relations there are many different ways of communication, which are often not formally embedded into an offer and acceptance. Even if in an offer and acceptance can be identified with standard terms therein, a complete match cannot be achieved. Standard terms are designed to favor only one party, regardless by whom they were prepared, how they are presented or whether they consist of a comprehensive set or only one or two provisions.[48] The present elaboration would lead to the following conclusion: the 'mirror-image' rule and standard terms in whichever practical form cannot co-exist. However, it will be shown, in reality they do, or put differently, they have to, due to Art. 19 CISG that contains the traditional rule for the formation of contracts.

Equally to the importance of the 'mirror-image' rule in contract formation, the 'last-shot' and the 'knock-out' methods play the same role in determining the terms of the contract.

5. The 'last-shot' and the 'knock-out' rules in determining the terms of the contract

In determining the terms of the contract, two doctrines or methods -- the 'last-shot' and the 'knock-out' rule - play a central role. According to the 'last-shot' rule, the terms of the contract will be determined based on the terms that are in the last submitted form. All terms in the last fired form are potential candidates for contract clauses while terms in the first form have no chance to become part of the contract. Clauses in the first form will completely be neglected. In contrast, the 'knock-out' rule gives preference to neither form and makes an attempt to establish a balance between the parties. The corresponding terms in the parties' forms will become part of the contract but the conflicting terms will be knocked out and replaced by the underlying statutory provisions.

The thesis will point onto the positive and negative consequences of the rules, research which method is more often applied and if there are potentially better, alternative solutions, relaying on the case-law and scholarly opinions.

6. Limits and structure of the thesis

The thesis will be limited to commercial contracts, as the battle of the forms phenomenon appears only in transactions between merchants. Besides commercial contracts, standard from contacts are part of everyday life; consumer: parking lots, theater tickets, gas station credit card purchases all have standard form contracts. However, contracts that consumers concluded are called contracts of adhesion, where sellers impose their sales terms on consumers on a "take it or leave it" basis. Contracts of adhesion are a separate issue that raise complex problems of their own, but do not fall under the scope of this thesis because consumers never use their own standard terms and therefore in such transactions the battle of the forms is excluded.

The other issue that is not going to be discussed is the battle of the forms in Electronic Commerce Contracts. For contracts concluded by electronic means, the general rules on contract formation apply on which a separate discussion is not necessary. However, there are also some special features, like the Electronic Data Interchange system [49] and "shrink-wrap" contracts [50] that would, on the other hand, require detailed elaboration, which unfortunately, due to the complexity of the issues and space limitation, will stay outside the scope of the thesis.

The thesis will deal with the issue of battle of the forms under the CISG and the UCC (and the NUCC). In interpretation of the two respective documents other important sources will be used, namely the UPICC, PECL, Restatement (Second) of Contracts, Official Comments on the UCC and, most importantly, the extensive case law. As in the case of the battle of the forms, a complete agreement on all contractual elements is lacking. The two main questions are: Is there a contract and if yes, what are its terms? In searching for answers on the two principle questions, the thesis will analyze Art. 19 CISG and § 2-207 UCC in order to discover the current situation at the battlefield of the forms, by taking an objective approach, showing different theoretical and practical solutions relying on the method of legal analysis. Ultimately, the two provisions will be compared by employing the comparative method, and eventually explored whether a change is necessary and if yes, in which direction.

Even if many distinguished scholars had been dealing with the issue, some potential fields of contribution had been identified. The elaboration on Art.19 CISG and § 2-207 UCC will be structured in an understandable manner, paying special attention to § 2-207 of the NUCC. Ultimately, based on the overall findings a possible uniform statutory solution will be suggested. On the other hand, the thesis will advocate that the UPICC or the PECL should be used for gap filling or at least interpretative purposes in order to ensure the uniform application of the CISG for the battle of the forms. The thesis will be divided into only two chapters.

Chapter I will discuss the issue of battle of the forms under Art. 19 CISG, giving its detailed analysis and especially pointing onto divergent court decisions and the positive and negative sides of the 'last- shot' and the 'knock-out' rules in determining the terms of the contract. Afterwards, special regard will be given to the UPICC and PECL.

Chapter II will deal with the battle of the forms under the UCC. § 2-207 UCC will be structured showing different scholarly opinions and practical solutions. At the end, § 2-207 NUCC is introduced and analyzed, in the lack of scholarly writings relying principally on the Official Comments.

From the perspective of contribution the conclusion is the most important part, where research results are laid down, compared and uniform solutions are suggested.

CHAPTER I - BATTLE OF THE FORMS UNDER THE CISG

The issue of battle of the forms constitutes a gap in the CISG. It is also ambiguous whether the problem is governed by the CISG or rather by the applicable national law. Commentators generally agree that the CISG and its Art. 19 should be applied for the battle of the forms. Art. 19 CISG consists of three paragraphs. Paragraph 1 incorporates the 'mirror-image' rule into contract formation, but paragraph 2 softens the strict compliance requirement between an offer and acceptance allowing a communication containing immaterial additions to cerate a binding contract on the terms of the offer with the modifications in the acceptance. Paragraph 3 gives a non-exhausting list of alterations that should be considered material.

Chapter I of this thesis will provide a detailed analyses of Art. 19 CISG and search for an answer on principle questions of battle of the forms litigations: Is there a contract and if yes, what are its terms? In searching for an answer to the second question, the 'last-shot' and 'knock-out' doctrines are going to be discussed from scholarly and practical perspectives also pointing to alternative solutions to the two theories that have been created in practice.

I. 1. Is the issue of battle of the forms governed by the CISG?

Art. 19 CISG was and remained one of the most controversial provisions of the CISG. There are two opposite views on the scope of the CISG. One stream is represented by scholars who consider the issue of battle of the forms as a matter of contract validity, which is indeed outside CISG's regulatory scheme. The other stream is comprised of scholars who agree the matter could and should be solved under the CISG but disagree under which provision.

a) One opinion: The issue of battle of the forms is not governed by the CISG

Some commentators are of the opinion; the issue of battle of the forms is not governed by the CISG. One group finds justification in Art. 4(a) CISG, the other in combined application of the CISG and the underlying domestic law.

      1) The first group of scholars advocate, the issue of battle of the forms falls outside the scope of the CISG by virtue of Art. 4(a) CISG,[51] which states: "this Convention is not concerned with the validity of the contract or any of its provisions". Therefore, the terms of the contract will be determined by the applicable domestic law and the solutions accepted therein.

The main concern and criticism of the argument is that judges may rely on the provision more often than anticipated by the drafters, thus Art. 4(a) CISG is a potential "black hole" for removing issues from the scope of the CISG.[52] Because of its possible abuse or overuse the provision should be interpreted restrictively.[53] Art. 4(a) CISG should be read together with Art. 7(1) CISG and promote the international character of the CISG contributing to its uniform application and save from fragmentation in contract formation. The whole process of contract formation should be governed by the CISG.[54]

      2) The other solution is an interesting thesis that suggests neither the total exclusion nor the complete application of Art. 19 CISG. The starting point lays in two basic questions: Is there a contract and if yes what is its content? Scholars advocating this solution believe consideration of these questions require separate regulations. Art. 19 CISG typically applies where there is no performance, if there is no performance the 'mirror-image' rule applies and there is no contract. After performance, in determining the terms of the contract, they suggest building the contract on common terms, as well as on the applicable dispositive law, general principles of contract interpretation, and especially usages of trade and good faith.[55] Therefore, if there is no performance by the parties under Art. 19 CISG, it would be decided there is no contract. But, if the parties performed, the terms of the contract would be determined relying on the applicable domestic law provisions, the final solution being adjusted to requirements of good faith and fair dealing.[56]

b) Other opinion: The issue of battle of the forms falls under the CISG

The majority of scholars are in favor of the inclusion the battle of the forms into the regulatory scheme of the CISG. Some expressly state, recourse to the relevant national law is not necessary;[57]

others just proceed with finding a solution based on the assumption the CISG applies. The advocates of this approach are also in disagreement, under which provision should the conflict of forms be resolved.

      1) One approach argues for direct application of the CISG, namely, its rules on contract formation in Part II (Arts. 14-24). The result would most likely be the 'last-shot' rule in determining the terms of the contract. Submitting its form the offeree would most likely make a counter-offer (Art. 19(1) CISG). If the initial offeror performs, not reading the fine print therein, it will be assumed the new offer is accepted (Art. 18(1) or (3) CISG).

      2) The other group of scholars is convinced the problem should be solved by general principles on which the CISG is based, namely relying on Art. 7(2) CISG.[58] They reason, the issue of battle of the forms constitutes a matter that is a governed but not expressly settled in the CISG, thereby constituting a gap that should be accordingly filled with the general principles of the CISG, namely, the principle of good faith and fair dealing. Accordingly, the terms of the contract would be determined by the 'knock-out' rule where none of the conflicting terms apply but the default provisions of Part. III of the CISG. The same result would be achieved by the application of the interpretative and potentially gap filling instruments, the UPICC and PECL.

      3) Another original solution is the theory of implied derogation from Art. 19 CISG. If the parties have agreed on the essential terms of the contract and performed despite contradictions in their standard terms, following Art. 6 CISG, which allows derogation from the CISG and any of its provision, there would be a tacit derogation from Art. 19 CISG. The terms of the contract would be determined by searching for a common intent of the parties and the application of Art. 8 CISG.[59]The conflicting terms would invalidate each other; the terms of the contract would be determined applying the 'knock-out' theory.

In practice, courts are inclined to find the CISG is applicable for the battle of the forms, apply Art. 19 CISG for the formation of contracts but in determining the terms of the contract the 'last-shot' or 'knock-out' rules are equally present. Moreover, in finding solutions for the battle of the forms, courts also find alternative solutions to Art. 19 CISG.

I. 2. Incorporation of the 'mirror-image' rule into the CISG

The CISG follows the traditional common law 'mirror image' rule, whereby the contract is formed with an offer (Art. 14 CISG) and an acceptance (Art. 18 CISG), which correspond in all aspects.[60] Replies to the offer, which purports to be an acceptance, but contain additions, limitation or modifications, are rejection of the offer and constitute a counter-offer (Art. 19(1) CISG) or a new offer that has to be expressly assented by the initial offeror. Therefore, the main rule in contract formation incorporated into Art. 19(1) CISG is the 'mirror- image' rule.

The 'mirror-image' rule is not suitable for modern commercial relations that characterize rapidity and flexibility in communication and the use of pre-printed standard forms. Business people neither have time, money nor interest to reach and express agreement on all routine matters that arise in the course of their relationship. They find it more convenient to use clauses that are prepared in advance for general and repeated use and which serve in their favor. Being aware there is no complete agreement, parties usually perform. Then the question arises: is there a contract? Can the CISG cope at all with modern ways of concluding contracts?

I. 3. Exception from the 'mirror-image' rule or an implied inclusion of battle of the forms into Art. 19(2) CISG

In considering the issue of battle of the forms, Art. 19(2) CISG is the key provision. In order to avoid absurd situations when a smallest divergence would amount to a new offer, paragraph 2 has been added to soften the requirement of strict compliance between the offer and acceptance and allow under certain conditions the formation of contracts on the terms of the offer with the modifications contained in the acceptance.

A reply to an offer which purports to be acceptance but contains additional or different terms is an acceptance if three conditions are satisfied: a) the offeree intended its communication to be an acceptance; b) the terms contained therein does not materially alter the offer, c) the offeror did not object to the non-material changes in the offeree's communication.

a) A reply to the offer should purport to be an acceptance

The offeree can have different reasons for sending a reply to an offer; therefore the offeree should intend its communication to be an acceptance. For example a reply may be an independent communication with the sole intention to explore the willingness of the offeror to accept different terms while leaving open the possibility to accept the offer at a later point.[61] If the reply makes only inquiries or suggests possibilities of additional terms, the communication might not be indented to establish a contractual relationship.[62] Mere inquiries are to be considered as neither acceptances nor rejections of the offer.[63]

Therefore, a party's intention should be evaluated in the light of all the facts and circumstances of a case, especially taking into account statements or conducts made during negotiations, practices established between the parties, usages of trade and even conduct of a party after the contract have been concluded (Art. 8(3) CISG).[64]

The practical consequence of Art. 19(2) CISG is that if the alteration contained in the acceptance is material, any reply to the offer, even if intended as an acceptance will not operate as one. Instead it will amount to a counter-offer and the contract will not be formed until the initial offeror accepts the changed or new terms with a new communication that purports to be an acceptance.

b) Material versus immaterial modifications

In determining whether there is an acceptance or a counter-offer, the communication that purports to be an acceptance should be evaluated in the light of the change therein (Art. 19(1) CISG). Only immaterial alterations will make the acceptance a sufficient communication to create a binding contract (Art. 19(2) CISG).

At the Vienna Conference, Art. 19(2) CISG was one of the most controversial questions to settle. As a compromise, Art. 19(3) CISG had been added with a list of alterations that should be considered material. These are: terms relating to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party's liability to the other and the settlement of disputes. The crucial words "among other things" make the list non-exhaustive. Therefore, even if the aim of this additional paragraph was to make clear which changes are to be considered material, the intended clarity has not been achieved. What happens for example with a limited warranty, limitation of the time to pay, a reservation of title clause or clauses regarding transport of the goods, which commonly appear in standard terms and cause considerable problems in practice? More importantly, is it possible to delimit material from immaterial changes?

bi) Material alterations

In the attempt to find an answer on the question which alterations would be material, commentators, referring to the non-exhaustive list in Art. 19(3) CISG agree, the list makes it difficult even to imagine variations that would not be material [65] or that modifications that are considered to be material cover most of the aspects of the contract.[66] According to some scholars, there is even a presumption in favor of (rebuttable) materiality.[67]

Standard forms will usually contain clauses that amount to a material change, as the list of the terms that are deemed to be material in Art. 19(3) CISG embraces all matters of significance in contract conclusion and the purpose of standard terms is exactly to address such matters.[68]

Nevertheless, materiality is judged in the light of all the facts and circumstances of the case, especially usages and practices established between the parties. Thus the otherwise material alteration will be rendered immaterial, if it states an obligation that would, by virtue of the established practices between the parties, impliedly be included into the contract.[69]

In practice, for example the following clauses would be held material alterations: warranty clauses, disclaimer clauses, force majeure clauses, limitation of remedies clauses, arbitration clauses,[70] clause that declares an oral agreements to be invalid or exclude oral amendments to a written contract (Art. 29(2) CISG) [71] and a divergent choice of law clause, assuming that it is not already a matter covered by the term 'settlement of disputes' under Art. 19(3) CISG.[72]

bii) Immaterial modifications

As consequence of the broad range of alterations covered by the list in Art. 19(3) CISG, immaterial alterations would only be grammatical changes, typographical errors or insignificant matters such as specification of details, which were already implicitly included into the offer.[73] However, a different interpretation is possible, whereas the scope of non-material changes stretches to everything, which is not the substance of the matter.[74] Consequently, the acceptance need not use the exact wording as the offer so long as the difference in the language would not change the obligations of the parties.[75] If the terms of the offer are repeated with the offeree's different wording, verbal differences are possibly followed by the lack of intention to change [76] and unintentional modifications will normally not be regarded as material.[77]

Nevertheless, modifications that would be considered material can be immaterial depending on the circumstances of the case. The crucial point is that the change should not place one party in an obvious disadvantage and unambiguously favor the other. 'Neutral' modifications will generally be regarded as immaterial.[78]

Changes made to the advantage of the offeror (like a greater discount, delivery free of charge to the buyer, an extension to the warranty period requested in the buyer's offer) should all be capable of forming part of the contract without further formality and should not require an acceptance by the offeror.[79]

According to the case law, the following modifications have been found immaterial: a reply that modified the offer stating that the price would be adjusted to increases and decreases in the market price and deferring delivery of one item;[80] seller's standard term which reserve a right to change the date of delivery [81]; a request that the buyer can draft a formal termination agreement;[82] a request to treat the contract confidential until the parties make a public announcement;[83] and a contractual requirement that the buyer can reject the goods that are delivered within the stated period.[84]

It can be concluded that the submission of standard terms by either or both parties will result in a material change. The discrepancy will usually fall under the list in paragraph 3 and even if not, it is highly unlikely that a difference would only be of a grammatical nature and that it will not favor of one and amount to the obvious disadvantage of the other party. Hence, the majority of the changes in the acceptance will amount to a material alteration.

biii) The practical importance of the distinction between material and immaterial modifications

Despite the above discussion on difficulty that is caused by the wording of Art. 19(2) CISG, in reality courts, using the 'knock-out' and 'last-shot' rules often disregard the distinction between material and non-material terms.[85]

In this matter the Austrian Supreme Court in its ruling of March 20, 1997 [86] is significant. The court basically decided contra legem, holding that the examples in Art. 19(3) CISG are merely general presumptions that may be rebutted in individual cases.[87] It appears the courts' standpoint is not alone, the opinion is consistent with a prevailing view of Austrian scholars [88] and the Supreme Court just rationalized the already existing long practice.[89]

In the instant case, the dispute arose over the quality of the goods, on which during a long course of correspondence, the parties could not reach a final agreement. Despite being listed in Art. 19(3) CISG as a material alteration, the court concluded: "a modification concerning the elements listed in Art.19(3) CISG is to be considered material only if the circumstances of the case, the practices which the parties established between themselves, the negotiations or the usages do not indicate otherwise. In particular, a modification of the offer concerning the quantity of the goods, which is exclusively favorable to the offeror, would have to be considered non-material. Given that the offeror did not object, the contract should be validly concluded as it results from the modified acceptance." Hence, the court ruled the non-exhaustive list of Art. 19(3) CISG is not binding but solely contains presumptions in favor of materiality, which can be rebutted in individual cases relying on practices between the parties, trade usages, their conduct during negotiations and other relevant circumstances.

Another typical misinterpretation of what constitutes a material modification is the German, Baden-Baden District Court's decision of August 14, 1991,[90] where the court ruled that the time limit for notice of defects as fixed in the seller's standard terms had become part of the contract since the term contained therein could not be considered a material modification in accordance with Art. 19(2) CISG. The court completely disregarded the fact that the disputed clause is listed under Art. 19 (3) CISG as "extent of one party's liability to the other." The decision was found to be surprising and received criticism from scholars.[91]

A French court in Fauba France FDIS GC Electronique v. Fujitsu Microelectronik GmbH [92] held that a purchase order that altered price and delivery terms did not materially alter the terms of the offer. According to the court, the offer that allowed prices to be modified "according to market increases and decreases" was sufficiently definite (Art. 14(1) CISG) and the first reply by the seller to the buyer's offer, which made some modifications and specifications in the questioned terms, did not materially alter the offered terms and therefore constituted an acceptance pursuant to Art. 19(2) CISG. Hence, both the Court of Appeals and the Court of Cassation failed to discuss the fact that Art. 19(3) CISG specifically declares price and delivery terms as material alterations.[93]

The above narrow interpretations of material changes could be a ground for potential avoidance of the consequences of the 'mirror-image' rule. Courts could come to a conclusion that the deviation is not inconsistent with the offer in the light of commercial practice and good faith [94] despite relating to some essential contractual elements not expressly listed in Art. 19(3) CISG or in the light of trade usages, conduct of the parties during negotiations and other relevant circumstances despite being expressly listed in Art. 19(3) CISG.[95]

The conclusion that could be derived from the variety of possible solutions given by the commentators and the case law is that the dividing line between material and non-material changes is vague. Besides the smallest changes, mostly of grammatical nature, there is no consensus as to what constitute a non-essential alteration. Everything is a matter of evaluation of all the circumstances of the case at hand. Taking into account the nature and content of standard terms, the terms contained therein will usually amount to a material alteration. Still with the aim to promote uniformity and a desire to preserve the agreement, a restrictive interpretation as to what constitutes a material alterations should prevail.[96]

c) The offeror's reaction to the alteration, silence and objection

ci) The offeror is silent on the modifications

The acceptance is defined in Art. 18(1) CISG as "statement made or other conduct which indicates an assent." It is further emphasized that silence or inactivity does not amount to an acceptance. Therefore, an assent requires a positive action, such as one relating to the dispatch of goods or payment of the price (Art. 18(3) CISG). It follows that a general rule of the CISG is the offeror's silence and inaction on the modifications will not form a binding contract.

However, the CISG makes an exception in Art. 19(2) CISG stating that an objection is not necessary if the alterations in the offeree's communication are immaterial. Hence, the offeror's silence and inaction will amount to an assent of immaterial changes in the acceptance. The presumption is the offeror is aware of his right (and duty) to object and if he stays passive it will be considered that he waived his right for rejection (silently accepted the alterations) and consequently will be bound by them. However, even if being aware of a right for objection, standard terms are usually not read. The provision would not be problematical if the alteration really is immaterial. However, courts qualifying a change as immaterial, despite being material, could abuse the exception and hold the initial offeror bound to the contract under terms that are substantially different than he initially contemplated.

The cases, analyzed above, that misinterpret or more accurately disregard Art. 19(3) CISG, show the practical importance of the exception in Art. 19(2) CISG. The provision is designed to protect the initial offeror,[97] in case it does not agree with the additions contained in the acceptance its objection will withhold the contract formation. However, with an extensive interpretation of the courts, where every change is eligible to be qualified as an immaterial the aimed protection has not been achieved. There is a danger that in practice, offerors would find themselves bound to crucial changes without expressing an assent.

cii) The offeror objects to the modification

The other possible scenario is that the offeror notices the discrepancies in the acceptance and does not agree with the changes, thereby objects, orally or sends a notice to that effect. Consequently, no binding contract will be formed.

Here, however, the wording of Art. 19(2) is unclear by stating "without undue delay." The best solution is if the offeror reacts immediately.[98] When the contract conclusion takes place between parties who meet face to face the immediate reaction would be an immediate oral objection. However, in international transactions this rarely happens; more often parties conclude their contracts by correspondence, using various means of communication. When contract are concluded on distance, a dispatch of the objection is sufficient; receipt by the addressee is not a requirement for validity. A notice takes effect regardless of whether it had reached the other party or not.[99] A dispatch principle impliedly included into Art. 19(2) CISG is an exception in Part II of the CISG, whereby the contract is formed when the acceptance becomes effective (Art. 23 CISG) and it becomes effective when it reaches the offeror (Art. 18(2) CISG) [100] and is in compliance with Art. 27 CISG [101] that adopts the dispatch principle as a general rule of Part III of the CISG.[102] Therefore, Art. 19(2) CISG departs from the general rule in contract formation where a binding contract is concluded when the communication reaches its addressee, and accepts the general rule in Part III of the CISG allowing the offeror to rely on its communication even if it did not reach the offeree, provided it was given by reasonable means.

The idea behind the possibility of objection is that, even if the offeror objects, the contract will not be formed but parties can and will continue the negotiations until reaching mutually acceptable terms. However, after being rejected for adding a small change, the offeree may no longer be willing to accept the original offer.[103] Moreover, the continuance of the negotiations is even less likely if the offeror objects without any reason.[104]

I. 4. The legislative history of Art. 19 CISG

The importance of the issue of battle of forms and the use of standard form contracts in modern business life was recognized as an important problem from the beginning of the drafting process, yet it has not been addressed in the CISG. The question that emerges is, why?

At this point it is useful to turn to the legislative history of Art. 19 CISG as it helps to understand the provision itself as its stands today and being one of the most debated provisions of the CISG, the arguments that came up during the legislative process are of high interpretative values.

The predecessor of Art. 19 CISG was Art. 7 ULF.[105] Art. 7 ULF served as the basis for today's provision but, to reach the form it has today; the provision had been heavily debated and amended [106] being a battlefield between the traditionalists (Eastern, Socialist Countries) and the reformers (Western Countries). Socialist representatives promoted security and certainty in contractual relations that reflect planned economies. They insisted on the strict application of the 'mirror-image' rule, as well as dealing expressly with the issue of standard contracts and the battle of the forms. On the other hand, Western representatives having a completely opposite vision, advocated a more flexible approach that would leave room for interpretation in every particular case.

The express regulation of the issue of the battle of the forms has not been left without attention. The Secretariat's initial proposal of (then) Art. 7 dealt with the issue expressly. It made a difference between negotiated (not printed) and not negotiated terms (printed). The contract would be concluded on the terms of the offer with the modification in the acceptance (negotiated terms) and on the terms contained in the parties printed forms, which are not in conflict, thereby favoring the 'knock-out' rule in determining the terms of the contract. The proposal was criticized as one that would impose contracts on the parties even in case of material deviations between their respective "pre-printed forms.[107]"Accordingly, the Working Group rejected the proposal.[108]

The same destiny followed the Belgian delegate's proposal on the UNCITRAL Draft.[109] Recognizing the battle of the forms as a common practical situation, he suggested the new Sales Convention should settle it, and according to the solution he suggested, the contract should remain valid and the 'knock-out' rule applied for determining its terms.[110] The amendment was rejected with 6 votes in favor and 30 against. It was found that the issue was not ready for resolution [111] both because UNCITRAL had not yet discussed the problem [112] and because there was still uncertainty about the proper solution in domestic laws.[113]

On the other hand, when paragraphs (2) and (3) of today's Art 19 CISG had been discussed, there were even proposals that only the main rule, the 'mirror-image' rule, should be kept and the other two paragraphs deleted arguing, they would cause confusion in practice. The main argument raised against the suggestion was that it is a common commercial practice to conclude contracts with the use of general conditions.[114] The frequent use of standard terms was recognized as the reality of international trade and based only on 'mirror-image' rule "would be impossible to conclude an international contract without requiring the parties to set aside their general conditions, which they were hardly likely to do since it would mean giving the international uniform law a precedence over their own terms.[115]" Despite various suggestions in favor of resolving the battle of the forms, the final text of the CISG had been adopted without an explicit provision for its settlement. The issue was too sensitive with divergent solutions on national level. Therefore, compromise had been found in taking no sides that resulted in no solution.

Besides the explicit regulation of the battle of the forms the adoption of Art. 19 CISG as it stands today was not subject to less controversy. Interestingly, the incorporation of the outdated 'mirror- image' rule as the basic rule for contract formation went easily. The Secretariat's proposal was accepted with minor changes.[116] In contrast, paragraphs (2) and (3) had been surrounded with controversies just like the issue of battle of the forms.

Firstly, paragraph (2) and the necessity of its retention were questioned.[117] It was suggested the paragraph should be deleted because of all the uncertainties that surround the difficulty of differentiation between material and immaterial alterations. As reformers won the "battle", the paragraph had been kept with the exact wording as it is today.

As a counterstrike, the traditionalists managed to add paragraph (3), aiming to define what would constitute a material alteration.[118] The "new" paragraph appeared for the first time in t6he UNCITRAL Draft containing besides the list of material alterations a final clause with subjective connotations. According to the proposal, even if the alteration was expressly listed as material, it would not be considered as such, if the offeree "had reason to believe" such terms would be "acceptable to the offeror".[119]

The solution adopted is Art. 19 CISG is a result of a compromise between the two groups with different traditions and aspirations. Paragraph (1) of the final text introduces the main rule for contract formation, the 'mirror-image' rule. Paragraph (2) contains an exception from the basic rule when the modification "does not materially alter the terms of the offer". Paragraph (3) gives a non-exhaustive list of alterations that should be considered material.

Since the express regulation of the battle of the forms had been rejected, what is given instead lacks clarity and brings uncertainty in international transactions. Overall, the drafters considered the issue to be too complex for settling in a uniform way and that an adequate protection will be given by the application and interpretation of Art.19 CISG.[120]

I. 5. The principal question: is there a binding contract?

In the examination of the battle of the forms, besides different kinds of collision of the standard terms, it is also decisive how the respective parties react. In most cases, despite discrepancies in standard terms, contracts are performed voluntarily and disputes are rare. Nevertheless, when they do arise, the questions are: "Under the circumstances, is there a contract?" and "If yes, what are the terms of the contract?[121]"

The answer on a principal question, the existence of a binding contract, will depend on the stage in which the objection is raised. One of the possible scenarios is that before there has been performance, usually due to changed circumstances, one of the parties invokes the discrepancies between the forms as an excuse for non-performance, and claims that no contract is formed. Following the 'mirror-image rule' in Art. 19(1) CISG, and taking into consideration the general policy of the CISG, which is to restrain from imposing contractual obligations on the parties while they continue to disagree over terms proposed in the course of their negotiations,[122] besides minor, mostly grammatical changes, courts will decide there is no binding contract concluded. Art. 19(1) CISG contains a specific rule that defines a specific result. A deviating acceptance will not be an acceptance but a counter-offer. A counter-offer is a new offer that requires an explicit assent by the initial offeror and in the lack of such assent there is no contract formed. If there is no performance, there is no additional manifestation of intent, but also no harm done and even after declaring the contract invalid, parties stay free to proceed with negotiations and eventually reach an acceptable agreement.

It also has to be emphasized the rule can be abused for escaping contractual obligations due to changed circumstances. For example, in case of purchase and sale of commodities on a price-volatile market, the party who is affected by sudden price changes can invoke the discrepancies in the forms and the rule in Art. 19 (1) CISG and escape the consequences of changed market conditions.[123] In this attempt, the party will succeed if there has not been any performance. But what happens if the parties performed?

If dispute arise after the parties have actually carried out the core elements of the sales contract (delivery of goods, payment of price), they have at a minimum manifested a common intention on the creation of some form of binding mutual obligations.[124] Therefore, if after performance, some aspects of performance come under disagreement, it will be generally held there is a binding contract.[125]

The majority of the analyzed court decisions agree with the result. The line of reasoning is the following: the communication which first referred to standard terms was the offer (Art. 14 CISG), the second communication constituted a counter-offer (Art. 19(1) CISG) that has been accepted by the initial offeror by performing some of its contractual obligations (Art. 18 CISG).[126] Others, without going into detailed explanation, acknowledge there is a valid contract concluded [127] or just proceed in search for the terms of the contract assuming there is a valid contract concluded.[128] The reasoning of the German Lower Court in Kehl in its decision of October 6, 1995 is interesting: "However, based on the realization of the contract, both parties were in agreement about the essentialia negotii, and it must be assumed that they waived the validity of their conflicting Terms of Business or that they derogated from the application of Article 19, taking advantage of their autonomy pursuant to Article 6."[129] Another court held, "failure to conclude a contract within the meaning of Art. 19(1) and (3) CISG due to a lack of meeting of minds can only be assumed if the parties would have regarded the lack of consensus fundamental."[130]

In conclusion, regardless of what explanation courts find if parties performed the core elements of the contract, judges of different countries, whether later disagreeing over a method of determining the terms of the contract, are on this issue on common ground, holding there is a binding contract concluded.[131] The answer to the first question, whether there is a valid contract despite the lack of complete consensus, is positive.

I. 6. Battle of the forms after an oral contract

As a consequence of party autonomy, one of the general principles of the CISG, it is the possibility of concluding a valid and binding oral contract. According to Art. 11 CISG, the sales contract is not subject to any formal requirement; it need not be concluded or evidenced in witting. Consequently, parties often reach an oral agreement on essential terms of the transaction and then exchange their forms. The question is what effect, if any, has the exchange of forms on the prior oral agreement. The analysis differs depending on whether the forms are intended to confirm the oral agreement or replace it with a new contract.[132]

a) Forms intended to confirm the oral agreement

If the forms are intended to confirm the oral agreement, the terms therein will usually contain some terms that has not been discussed before. The contract of course remains valid, but what happens with the additional or different terms?

Art. 19 CISG is limited to issues of contract formation and Art. 29 (1) CISG regulates contract modification, but neither gives directions in determining the terms of the contract. The situation is even more complex, as changes in written documents are often submitted in the form of confirmation letters,[133] which are generally drawn to summarize and clarify the content of an oral agreement. Confirmation letters are one of the silent features of the CISG.[134]

Without going into discussion, if these commercial instruments fall under the scope of the CISG and examine different theoretical and practical solutions, it should be noted, there is still uncertainty what effect, if any, will the CISG give to an exchange or submission of confirmation letters.[135] The problem with these commercial instruments is whether to give them effect despite the other party's silence. Art. 29 CISG states that a contract may be modified by the mere agreement of the parties, the key word being therein the "agreement." Hence, any modification to the prior oral contract should require an agreement of the parties. How is the existence of an agreement determined?

      1) One of the alternatives is to compare the submitted forms, and an agreement is reached on those terms which commonly appear in both. The terms of the contract would be those that commonly appear in both forms.[136] Or alternatively, none of the terms in either of the forms would become part of the contract unless all terms of the two forms match.[137]

      2) Dealing expressly with additional or different terms in confirmation letters, the UPICC and PECL offer different solution.[138] Additional or different terms in letters of confirmation which do not materially alter the terms of the oral contract, will become part of the contract, unless an explicit objection of the other party. But terms that essentially alter the oral agreement will require an express assent.[139] The result is the same as when Art. 19(2) CISG would be applied.

      3) The other solution is to condition the validity of the terms in confirmation letters on usages, more importantly, international trade usages.[140] Then, even the recipient's silence would be sufficient, provided "the relevant business customs exist between the parties of that particular branch of trade" (Art. 9(2) CISG).[141]

      4) The CISG's rules on contract formation could also be applied. Once the contract had been validly concluded, the written documents with the altering terms would be viewed in the light of Art. 29 CISG. In determining the existence of an offer and acceptance and their match, Arts. 14, 18 and 19 CISG would be invoked. Since the ultimate aim is to achieve an "agreement" which is according to the 'mirror-image' rule an exact match of the offer and acceptance, silence and inactivity would not be sufficient to demonstrate the parties' intent.[142] Consequently, the 'last-shot' rule in determining the terms of the contract would be excluded and the 'knock-out' rule applied.

An important decision for the modification of an oral contract is the case Chateau des Charmes Wines Ltd. v. Sabate USA Inc.[143] Here, the court held, the oral agreement concluded via telephone on essential terms of the contract remained valid, and the seller's later attempt to include the forum selection clauses therein remained ineffective. Because the contract had already been concluded, any new terms were merely offers, which required express assent and did not create an obligation to reject: "nothing in the Convention suggests that the failure to object to a party's unilateral attempt to alter materially the terms of an otherwise valid agreement is an "agreement" within the terms of Article 29.[144]"

Similarly, in the USA case Claudia v. Olivieri Footwear Ltd.,[145] the seller, by putting additional clauses on the invoice, made an attempt for contract modification, but besides accepting the goods the buyer never expressly assented to the modifications in delivery terms. The court held there was no valid contract modification as the delivery terms are material alterations the invoices amounted to a counter-offer and required an explicit assent by the buyer.[146]

b) Forms intended to replace the oral contract

When forms are intended to replace the prior oral contract, the parties' subsequent communication has to comply with all the requirements of Arts. 14, 18 and 19 CISG on contract formation, and the new contract will replace the oral contract entirely. However, the new contract will be viewed again in terms of an offer and acceptance but, as an additional difficulty, it might not be possible to determine which form constitutes the original offer and which the counter-offer, as probably both forms would be sent roughly at the same time. Therefore, if the exact order of the parties' communication is impossible to determine, it should be considered neither was sent in response to the other.[147] Only if parties made an additional manifestation of intent performed under the contract will it be held that there is a valid contract.

In conclusion, even if the 'mirror-image' rule requires a perfect match between the offer and acceptance, in practice courts will hold there is a binding contract despite discrepancies in standard terms, provided the parties performed and thereby manifested their intent towards a binding contract. Once it has been established there is a valid contract, the next, more complex step follows, namely, it has to be determined which are the terms of the contract. In determining the terms of the contract, the 'last-shot' and the 'knock-out' rules had been developed proposing different solutions to the problem, but practice is not left behind finding alternative solutions in instant cases.

7. The terms of the contract: the 'last-shot' rule

The 'mirror-image' [148] rule for offer and acceptance produces the 'last-shot' or sometimes called the 'second-shot' [149] rule in the battle of the forms.[150] According to the 'last-shot' rule, the terms of the contract are determined by the form that is submitted or "fired" the last in the battle of the forms. The terms in the last submitting party's form, which is usually the seller, will completely prevail in determining the terms of the contract and the other party's form will remain completely neglected.

For example, the buyer sends its purchase order and the seller replies with an order acknowledgment, whereas both parties have printed terms on the back of the documents. The seller sends the goods and the buyer pays the price. In determining the terms of the contract, the application of the CISG's rules on contract formation (Arts. 14-24) will lead to the following result: the buyer's order would be an offer (Art. 14 CISG) and the seller's acknowledgement form an acceptance (Art. 18(1) CISG). However, as the document submitted by the seller contained additional or different terms printed in the standard terms, which materially altered the offer (Art. 19(3) CISG) or at least hypothetically, the buyer after not reading the fine print missed the chance to object to the deviations that are considered to be immaterial (Art. 19(2) CISG), the buyer is bound by the seller's standard terms either because it accepted the goods and paid the price, therefore assented to the seller's new offer by performance (Art. 18(1) & (3) CISG) or because it failed to object to immaterial alterations (Art. 19(2) CISG).

The underlying logic is that the offeror has an implied duty to object to the additional or conflicting terms. Failing to object and commencing performance results in finding an implied consent to the terms of the acceptance or more accurately in a counter-offer.[151] The 'last-shot' rule creates a rebuttable presumption that the last form has been consented to. Although this presumption is rebuttable, the burden of proof is on the disadvantaged party.[152]

What is positive about the 'last-shot' rule is its easy practical application and certainty in commercial transactions. If this method is accepted as governing in determining the terms of the contract, parties can easily determine which form was the last and foresee the terms of the contract. They are also willing to accept the terms of the contract and admit the defeat in the battle of the forms.[153] Even if the rule does not bring a fair solution it does bring certainty in international transactions leaving less or no room for arbitrary solutions in individual cases. However, parties being aware that the last form governs, could try to be the last in the battle what would result in a so-called "ping-pong" effect, which is a potentially endless battle increasing the already burdensome amount of paper work that flows between the parties.[154]

On the other hand, the 'last-shot' rule is heavily criticized as casuistic, unfair [155] mechanic and formal.[156] It does not reflect international consensus to be part of the CISG.[157]

Van Alstine is one of the harsh critics of the rule as the solution it offers is irrespective of the parties' intent. The starting point of the rule lays in a fictional assent of the parties, namely, that a mere performance of essential elements of the sales transaction (shipment of the goods or payment of the price) necessarily expresses the intent of the parties towards contractual commitments. The rule remains blind to the nature of parties' relationship, its level of complexity, degree of formality, and disregards their prior communication. In its practical application, the traditional rule requires that, in all cases, the statements and conduct of the parties are embraced into a formal offer and a formal acceptance and that the last express declaration is the exclusive indication of intent towards contractual obligations.[158]

Van Alstine admits, the rule possesses a certain analytical purity, but it lacks sufficient justification in the core policies and principles of the CISG. He even goes as far as stating that with rules like this "the CISG ceases to be an aid in international transactions but begins to be an independent impediment in the effectuation of the parties' common intent."[159]

In search for the parties' intent, it can be concluded that neither party contemplated the application of the other's standard terms. However, if it is necessary to choose between the competing forms, Prof. Honnold suggests an alternative method to the automatic application of the last fired form.[160] According to him, effect should be given to the parties' intent under Art. 8(2) CISG ("statements and conducts are to be interpreted according to the understanding that a reasonable person as the other party would have had in the same circumstances"). As parties are not aware of the others' standard terms, their inclusion into the contract and content of the terms, save in the exceptional and probably hypothetical situation where the party does everything to alert the other side, the party that uses standard terms would create ambiguity. As it is a generally accepted principle that doubt is to be resolved against the party who creates the ambiguity, benefit could be denied to the party who sent its ambiguous communication. However, though as an alternative, even Prof. Honnold concludes "choosing like this between the conflicting terms seems artificial."[161] If the starting point is the acceptance is ambiguous because it contains additional or different terms among the standard clauses, the offer is just as ambiguous as the acceptance. Even if the offer was the first communication, it also contained terms that have not been read and therefore in fact not assented by the offeree. According to the suggestion, neither term in the parties' forms would apply.

The 'last-shot' rule is not suitable for modern commercial relations, where contracts are concluded rapidly with domination of pre-printed form contracts and where business people neither have time nor the will to agree on all possible consequences and details of their contractual relationship. Modern transactions are not based on a kind of detailed negotiation assumed by the 'mirror-image' rule.[162] It is, therefore, unfair to impose on one contracting party a whole set of contract clauses, while the other is completely freed from new terms being bound only by clauses that serve its favor and all as a consequence of a single fact: being the last in the battle of the forms. Concluding a contract is not a hazardous game; it should not depend on luck of being the last. Parties wish to have clearly defined rights and obligations, applied from the beginning of their relationship, and not imposed on them when problems arise.

Moreover, the starting point of the 'last-shot' rule is, that parties read each others forms, which practice showed is not the case. In most transactions, agreement is reached to the basics, forms are exchanged, and contracts are concluded without having regard for the differences in boilerplate terms. Even if they are exceptional circumstances read, parties in modern business world do not have time to go back and agree over and over on every possible terms of the contract.  It is also suggested that "business would come to a halt" if parties were forced to read each other's forms.[163]

Hence, the 'last-shot' rule is unfair, unambiguously favoring and giving contractual advantage to the party who last submits its form.[164]

On the application of the 'last-shot rule in practice, Pilar Perales Viscasillas is of the opinion that the strict application of the 'mirror-image' rule characterized initial judgments but the jurisprudential evolutions showed that the 'mirror-image' rule has been relaxed sufficiently, allowing different treatment of material and immaterial terms.[165] Despite all the criticism, even today, courts tend to apply the 'last-shot' rule in determining the contract terms.[166]

Magellan International Corp. v. Salzgitter Handel GmbH [167] illustrates the reality of Art.19 CISG, the strict application of the 'mirror-image' rule whose mitigation depends on a court's discretion.[168] Magellan, an American distributor of steel products, negotiated with Salzgitter, a steel trader in Germany, for the acquisition of steel bars from Ukraine. Magellan provided Salzgitter with written specifications of the product, proposed pricing, and agreed to issue a letter of credit. Salzgitter responded by proposing higher prices, which Magellan accepted and issued two purchase orders. Salzgitter replied sending a confirmation form. The parties tried to negotiate the differences in their standard terms, but without complete agreement. Magellan opened a letter of credit and Salzgitter commenced the delivery.

When the dispute arose, the court had to establish whether there was a contract. The court held, Magellan's purchase orders constituted offers (Art. 14(1) CISG), Salzgitter's response with price changes was a counter-offer (Art. 19(1) CISG).  Subsequent exchanges of offers and counter-offers ended with Magellan's performance, when it issued the letter of credit (Art. 18(1) CISG). Thus the terms of the contract were those agreed on at the time the letter of credit was opened. The court did not discuss the merits, and determined the contract terms, but was content to find that a contract existed based on Magellan's performance. In finding a contract-by-conduct, the court seems to have implied that the 'last-shot' doctrine would apply.[169]  Magellan's performance constituted a "complete (mirrored) assent" to the last form sent by Salzgitter. As such, the terms of the contract would include the provisions of its confirmation form that specified vessel loading conditions, dispute resolution, and choice of law. If the CISG made any attempt to mitigate the harshness of the 'last-shot' doctrine in contracts-by-conduct that buried attempt was lost in the courts decision at hand.[170] 

In other cases where, by the available sources it cannot be determined with certainty whether two or just one form had been involved, courts unambiguously applied the familiar pattern, offer-counter-offer acceptance-by-conduct, thereby accepting the 'last-shot' rule in determining the terms of the contract.

A German court, in the January 13, 1993 case before the Appellate Court of Saarbrücken, held that the buyer's taking delivery of the goods constituted conduct indicating assent to the offer and amounted therefore to an implied acceptance of the standard terms therein.[171] In another case (ICC Arbitration Case No. 8611 of January 23, 1997), the arbitrators held, the buyer accepted the seller's standard terms printed on each invoice by failing to object.[172] Another German court held (March 11, 1998, Appellate Court München),[173] where both parties agreed to "Standard Conditions of the German Textile Industry", the buyer accepted the differing terms in seller's General Conditions by accepting the goods. It ruled, seller's additional terms function as a supplement to the "Standard Conditions of the German Textile Industry". Similarly, in a German May 23, 1995 decision of the Appellate Court of Frankfurt, the court held that acceptance of delivery indicated assent to a material modification.[174]

In a May 24, 2006 case by the German Appellate Court Köln, a dispute arose between a German buyer and Dutch seller. The buyer sought through its motion to obtain an expert opinion on the question of whether a shock-cushioning seat can be built on a low-floor bus bought from the seller. The first question addressed by the court was whether it has jurisdiction to hear the case. The buyer used a form for its order, on the reverse of which the standard terms of the German Association for Motor Trades and Repairs were printed and the seller used its own standard terms in the course of contract conclusion. But quite unusual, the clause incorporated in the seller's standard terms was identical in content to the one contained in the standard terms referred to by the buyer. The court held "the interpretation of contracts with conflicting terms leads to the application of at least those provisions which do not differ. Beyond this, the so-called "last-shot doctrine" applies, according to which the governing terms are those which were exchanged last." Hence, through the incorporation of seller's standard terms, the parties concluded a valid choice of forum agreement.

I. 8. Contract terms determined by the 'knock-out' rule

Under the 'knock-out' rule, the terms of the contract are those that are common in both forms and the conflicting terms invalidate each other, with the missing terms supplied by the underlying statutory law,[175] namely the CISG. Only if the CISG does not regulate the issue, the underlying national law by virtue of private international law, trade customs and commercial practices between the parties will supply the gap.[176] Clauses that are common in substance include clauses which in their essential aspects, either by content or by finality, equally satisfy the interests of both parties.[177]

The 'knock-out' rule in contrast to the 'last-shot' rule, assumes forms are not read, which is in compliance with commercial reality. In modern commercial practice, parties extensively use their standard forms in the course of contact conclusion but it is commonly known nobody reads the fine print therein. The 'knock-out' rule gives a more favorable solution to the battle of the forms according to the majority of commentators.[178]

It is also in accordance with the requirements of fairness, as the purpose of the rule is not to give either of the parties advantages of having its terms prevail over the other's.[179] The conflicting terms fall out and are replaced with terms that are new or more precisely, have not been counted for as contract clauses by either party, creating an equally disadvantaged situation for both.

The 'knock-out' rule is also more flexible emphasizing the parties' intent. The "foundational perception of contract law is that contracts are formed and defined by a corresponding common intent of the parties."[180] The "analysis of the modern relationship between the parties should focus on an identification of appropriate standards to effectuate a common intent of the parties to form binding obligations, instead of focusing on the absence of a complete agreement.[181]" Relying on common intent of the parties, van Alstine developed an interesting justification for the application of the 'knock-out' rule. According to him, three necessary elements have to be fulfilled for the existence of a common intent:

  1. The disagreement between the parties cannot relate to the essential terms (essentialia negotii) in the sense of Art. 14 CISG, which defines the core of a sales contract (the goods, quantity, and - perhaps -- price);

  2. In the course of negotiations, the parties must have proposed some terms (probably non-essential) over which they have either affirmatively disagreed or passively failed to agree;

  3. The other declarations and/or expressive conduct of the parties must manifest a broader consensus between them that they have nonetheless created binding contractual obligations, and thereby preclude the application of Art. 19(1) CISG.[182]

However, even if all three elements are satisfied, the CISG will give little guidance how to define the parties' relationship.[183] In searching for a possible solution, van Alstine turns to the general principles on which the CISG is based, to the principle of party autonomy.[184] Whether party autonomy is exercised, in other words, if there is a mutual will, it is determined by the interpretation of the parties' intent.[185] The primary test for interpreting a party's expressions of intent is a subjective test, focusing on the actual intent of the parties. If the subjective standard does not apply, the focus switches to the understanding of a reasonable person in the same position as the other party would have had.[186]

Although from Arts. 14-24 CISG, at first it sight might appear that the CISG identifies an offer and acceptance as the building blocks of a contract, in reality it establishes the effectuation of the common intent of the parties as the primary value in its hierarchy of norms.[187] Together with the mandate of flexibility in the search for that intent (Art. 8 CISG), the principle of the primacy of party autonomy makes clear the provisions of the CISG are not to be applied in a rigid manner that would frustrate the common intent.[188] Moreover, "the intent to enter a contract on the part of both parties trumps the Article 19 argument for invalidity."[189]

The application of the 'knock-out' rule requires some flexibility. Though all negotiations should be taken into account, in order to determine a "continuing intent" statements and conduct of neither party can be interpreted as an "indication of assent" to the formal declaration (the offer or counter-offer) of the other party.[190] Van Alstine advocates, effect should be given only to the core of the agreement where neither of those separate indications of intent can be interpreted as an unqualified assent to the content of the other party's formal declaration, but the parties nonetheless manifest a broader common understanding (a consensus) on the creation of a binding obligation.

Hence, if there is a common intent of the parties to conclude a contract and they reach an agreement on its essential elements (Art. 14(1) CISG), the 'knock-out' rule will invalidate the conflicting terms, and hold the rest valid, the theory is sometimes also called the 'rest-validity' theory. The lack of agreement is restricted only to the additional terms and they did not become part of the contract.[191]

However, there is no common intent if one (or at least one) of the parties does not want to contract otherwise except on its own terms. The consideration raises the problem of general defense clause, a clause that deserves special attention.[192] General defense clauses are, as the name indicates, general because they refer to all conditions of the other side, and reject every clause that is either additional or different. If both parties refer to their own standard terms, but one form contains a general defense clause, the question is, how will the terms of the contract be determined and will the defense clause be enforceable under the CISG?

One important and often commented on, though mainly because of its inconsistent reasoning, is the decision of the German Supreme Court of January 9, 2002.[193] Its significance can be derived from the fact that it confirmed that despite conflicting standard clauses, the contract is valid, and the conflicting terms are void being replaced by the provisions of the CISG.[194] It, moreover, involved a general defense clause and quite unusually, standard terms of one party appeared to be in favor of the other party (the non-drafting party).

A German seller and a Dutch buyer entered into several contracts for the sale of powdered milk, which, in turn was exported to customers in Algeria and Aruba (Antilles). The contracts were concluded by telephone and subsequently confirmed in writing. Both parties referred to their own standard terms, whereas the confirmation letter sent by the seller contained also a general defense clause. The seller's form was the last submitted; the buyer stayed silent on its points, and started performance. The seller's standard term regulated the buyer's duty for inspection and time period for the lack of conformity notice and the buyer's clause, unusually, considerably limited the seller's liability, until the invoiced amount of the delivered goods.[195] The customers claimed that some parts of the powdered milk were defective, and the Dutch buyer sought compensation from the German seller alleging non-conformity of the delivered goods. While the seller declined to pay damages as requested by the buyer, the buyer commenced a court proceeding.

The seller argued that the CISG was derogated by a clause in its standard forms and that, under the applicable German Civil Code, no damages could be claimed. In addition, a clause in the standard form of the buyer limited recoverable damages to the purchase price and was applicable here despite the conflict of standard terms because it was favorable for the seller. Hence, the seller in its arguments invoked a clause contained in the buyer's standard terms, which was in his favor, limiting its liability to the invoiced amounts.

The case at hand was unusual and complex. The seller's form was the last, containing the defense clause, but the terms contained in the buyer's form were actually in favor of the seller. The two terms were more compatible than in conflict, by virtue of their content (one referred to time limit for lack of conformity notice and other to liability for non-conformity) and aim (both favor the seller).

The court effectuated the seller's defense clause, and refused to enforce the term in the buyer's standard form despite being in favor of the seller. It refused to single out some clauses of one side which might be beneficial for the other side since the buyer's standard form was in its entirety fair and balanced, but deviated from the CISG regime and was contradicted by the seller's terms. One could not pick out only some clauses which favor one party. The court also pointed out that in the case at hand, the result would not change even applying the 'last-shot' doctrine, since it would be contrary to the principle of good faith (Art. 7(1) CISG) [196] for the seller, whose standard terms were sent after the buyer's, to assume that only those terms of the buyer's standard conditions more favorable to the seller would apply. In other words, the court noted, there is no partial misapplication of one side's standard terms. They either become part of the contract or are being invalidate completely applying one of the methods for determining the terms of the contract. If the 'knock-out' doctrine applies for the establishment of contract terms, clauses which would by its application fall outside the contract, cannot become part of it, not even if beneficial to the other side. As for the terms of the contract, it ruled, the conflicting terms in the forms knock each other out, as none of the parties could have intended to be bound by the other's standard terms. Consequently, as none of the parties' standard term applies, the liability of the seller for lack of conformity was governed by CISG.[197]

In another case the German court in Amtsgericht Kehl of October 6, 1995 [198] followed the application of the 'knock-out' rule but besides or instead sole theoretical justification, searched for an acceptable legal ground in the provisions of the CISG.

The Court held that neither of the standard terms becomes part of the contract.[199] The fact that the parties had started performance showed their intention to be bound by the contract comprised of terms already agreed upon as well as any standard term common in substance, with the exclusion of the conflicting terms such as choice of law clauses. Therefore, the parties' impliedly derogated from Art. 19(1) CISG or they waived the enforcement of their respective standard terms, in accordance with the principle of party autonomy in Art. 6 CISG. The principle of party autonomy enables the parties to dispose of their rights, to form the procedure of contract conclusion according to their aspirations [200] and also to deviate from Art. 19 CISG in order to create a binding contract without agreement on all points.

Another German court, the Appellate Court in Düsseldorf in its decision of July 25, 2003 confirmed the 'knock-out' rule but gave an unusual reasoning.[201] In a dispute between an Italian seller (claimant) and German buyer the court needed to determine if the parties agreed on a choice of law clause. The unique element of the case makes the fact that the court analyzed if either of the standard terms is incorporated into the contract, eventually concluding the buyer failed to prove it made available its standard terms to the seller (the buyer solely made a referral in its purchase order), on the other hand, the seller fulfilled this condition. The seller, besides referring to its standard terms, also made available the clauses by printing them on each invoice. Consequently, the buyer must have been aware of the seller's intention and as a result, the buyer's choice of law clause did not become part of the contract. However, devoting a considerable space for a detailed analysis of whether standard terms are eligible to become part of the contract, the court briefly introduced both theories and concluded, there is no agreement to the choice of law clause and applied the 'knock-out' theory. It remains unclear why did the court make such an in-depth analysis on the conditions for incorporation of standard terms if afterwards the court completely neglected the results arrived at.

Other courts are also in favor of the 'knock-out' theory. The French Supreme Court in two subsequent decisions [202] held the conflicting terms invalidates each other and there is no valid agreement on the forum selection clauses, but the CISG applies. In two other cases, the Spanish Supreme Court [203] held there is no valid agreement to arbitrate if the clause appears in only one form.[204]

Though the 'knock-out' rule is held to be neutral in its approach, by not favoring either of the parties being more just and fair than the 'last-shot' rule, its application would sometimes undermine the parties' intention and produce unfair results.[205] If, for example, there is a conflict between notices of non-conformity clauses. One form states the period for giving notice of lack of conformity is two months and the other two months and fifteen days. Under the 'knock-out' rule, the contradictory clauses cancel each other and the CISG applies. The CISG provides in Art. 39(1) a "reasonable time" which is subject to further interpretation, but most likely it would be less than two months. Hence, the neutral 'knock-out' rule would go against the will of both parties.[206]

I. 9. Alternative approaches to the 'last-shot' and 'knock-out' rules

Both, the 'knock-out' and 'last-shot' doctrines have their positive sides but also drawbacks, hence courts applying the CISG rarely reach after the methods in their "pure" form. More often they search out alternative solutions, which more or less follow the path of one theory. The reason is in a search for a just and acceptable decision or sometimes in the court's unfamiliarity with the provisions of the CISG and the solution is a result of its misinterpretation.

a) Reliance on the parties' conduct in resolving the battle of the forms

One of the innovative decisions that fail to follow either of the familiar patterns is the ruling in Filanto v. Chilewich.[207] A New York buyer (Chilewitch) entered into multiple contracts with an Italian seller (Filanto) in order to fulfill a master agreement that the buyer had with a Russian partner ('the Russian Agreement'). The Russian Agreement contained a clause, which required all disputes to be settled by arbitration in Moscow. The buyer performed one of the contracts and the seller commenced action in New York, claiming breach of contract. Buyer sought a stay of the action and commenced an arbitration proceeding pursuant to the arbitration clause in the Russian Agreement. The issue in front of the New York court was, whether the arbitration clause in the Russian master agreement had been incorporated into the contract between the buyer and seller. The Court found the seller was bound by the arbitration agreement, because the Memorandum Agreement (hereinafter MA) contained a term incorporating by reference provisions of the Russian Agreement, specifically including the agreement to arbitrate. As the MA was considered to be the buyer's original offer the arbitration agreement was part of it, which the seller was deemed to have accepted. However, the seller did not sign the MA immediately but only five months later and also sent a cover letter that asserted the seller was to be bound only by a few provisions of the Russian Agreement but not the arbitration clause, thereby making an implied objection to the arbitration clause. In the meantime, the buyer, without an express acceptance of its offer, started performance, and opened a letter of credit.

The situation at hand is a typical battle of the forms. Buyer in its offer referred to its Russian Agreement and seller, regardless of its actions in the meantime, expressly objected to most of clauses therein in its cover letter. The Court disregarded that the express objection in the seller's reply would be a counter-offer (Art. 19(3) CISG) and that it repeatedly objected during negotiations to the incorporation of an arbitration clause (Art. 8(3) CISG). On the contrary, the court took into account previous practices between the parties (Art. 8(3) CISG) and held that, due to the extensive course of prior dealings, the seller was under a duty to alert the buyer in a timely fashion of its objection (an objection made five months after the offer was not timely). All the more since the seller knew that the buyer had already commenced performance by opening the letter of credit. The problem with this reasoning is that the CISG explicitly states that "[s]ilence or inactivity does not in itself amount to acceptance"(Art. 18 (1) CISG).[208]

To get around this, the court referred to the parties' prior course of dealing, which according to the court, established an obligation on seller's part to alert the buyer quickly to any objections it might have. The fact that the seller itself later on started to perform by shipping part of the goods constituted a further indication of its intention to accept the buyer's original offer (Art. 18(1) CISG). Equally, the seller's subsequent reliance on clauses in the Russian Agreement, which it had previously excluded, was another indication of its intention to be bound by all clauses therein (Art. 8(3) CISG).[209] As an additional argument, the court pointed on the possibility of separation of questions of the validity of the sales contract and validity of the arbitration agreement.[210]

After analysis of the facts and the court's reasoning, it can be concluded that this solution does not fall under the 'knock-out' rule, nor under the 'last-shot' rule. Interestingly, the court was aware of the 'mirror-image' rule in Art. 19(1) CISG and the consequences thereof; it even acknowledges the cover letter constituted a counter-offer.[211]Yet it completely ignored Art. 19 CISG in reaching its conclusion and relied on Art. 8 CISG citing different circumstances that would, in its opinion, sufficiently indicate the parties' intent. According to the present decision, if a party continues to perform or fails to object in a timely manner to additional terms, it runs the risk that its conduct, silence, or act of performance will be interpreted by a court as an acceptance of the disputed term. Nevertheless, the case is not typical and probably will not serve as an example for other judges, as the US court basically misapplied the CISG's rules in order to make the case come out the way the court thought it would be under the UCC.[212] In its reasoning, the CISG is compared constantly with the UCC and played merely a secondary role in the court's analysis, as the court cited Restatement (Second) of Contracts and cases applying US law.[213] Without going into a discussion whether the decision was right or wrong, it shows rooms for maneuvering under the CISG and a possibility of a wide variety of solutions of similar factual situations.

b) The 'first-shot' rule

Another unusual decision had been made by the Dutch court in the case of ICT v. Princen Automatisiering Oss.[214] In this case, a Dutch seller and a German buyer concluded an oral agreement for the sale of computer software. Three days later, the buyer confirmed the content of the agreement by means of a written order; the same letter contained a forum selection clause in favor of a German court printed as a footnote in small characters. Afterwards, the seller confirmed the buyer's written order by fax and declared that its own standard terms were applicable, hence a battle of the forms occurred. On the buyer's request, the seller forwarded its general conditions whereupon there was no reaction from the buyer's side: however, after having paid a part of the purchase price, the buyer stopped further payment because of defects in the software program and an improper installation. The seller commenced an action to obtain payment in a Dutch Court.

The buyer claimed his forum selection clause was applicable. Though the court referred to Art. 19(1) & (3) CISG, it concluded that according to the CISG's provisions on acceptance (Art. 18 CISG), the buyer's forum selection clause was applicable and denied jurisdiction to hear the case. In the court's opinion, by replying to the buyer's written confirmation, the seller had expressly excluded the applicability of its own standard terms with regard to "all terms" conflicting with the ones stated in the buyer's confirmation. The result was that the seller accepted the buyer's confirmation in its entirety and the terms in seller's general conditions were applicable insofar as the question is not regulated by the terms of the buyer's form. As both general conditions contained a forum selection clause, according to the court's opinion, the seller accepted the one in favor of a German court. The court in its reasoning created a 'first-shot' approach, namely, that the terms of the party who first submits its form will be applicable for determining the terms of the contract.

c) The evaluation of standard terms separately, whether each satisfies conditions to become part of a contract

The Paris Appellate Court in its decision Isea Industrie S.p.A. et al. v. SA Lu et al.[215] ruled: in a case of the battle of the forms, neither standard term applies.

A French buyer ordered packaging for biscuits from an Italian seller. The buyer's standard terms, printed on the reverse side of the order form, contained a forum selection clause in favor of a French forum. Some days later, the seller sent an order confirmation making an express reference to its own standard terms, printed on the reverse side of the same document, which contained a forum selection clause in favor of an Italian forum. Regarding the validity of the forum selection clause invoked by the buyer, the Appellate Court held that, as the buyer placed its standard terms on the reverse side of the order form and in the absence of any reference on the front of the document, the forum selection clause was not to be considered accepted by the seller. Regarding the forum selection clause invoked by the seller, the Appellate Court stated that the order confirmation had been sent to the buyer when the contract had already been concluded (Art. 18(2) CISG). Hence, the Appellate Court ruled neither forum selection clause is applicable. Moreover, as in buyer's case, the reference was not appropriate and in the seller's the contract had already been concluded; hence, neither standard form applies in its entity. Therefore, not just the conflicting clauses failed to become part of the contract but all clauses that were pre-formulated standard terms.

To arrive at this conclusion, the court applied an interesting method. It analyzed whether either of the clauses can become part of the contract. The question, which conditions standard terms have to satisfy in order to become an integral part of the contract or the enforceability of standard terms (on which issue the CISG is silent) will be analyzed only to the extent that the scope of the thesis allows.

Standard terms in order to become part of the contract, have to be expressly referred to, though if there is a previous course of dealing between the parties an implied incorporation may be admitted.[216] When will a reference be regarded as explicit?

The rule is: standard terms are binding upon the party as long as they are reproduced above the signature. Terms printed on the back, as the French Appellate Court ruled, will not become an integral part of the contract unless they are expressly referred to on the front page. The same rule applies when the terms are contained in a separate document, with an addition, a party must be reasonably aware of the content of standard terms it is supposed to agree to them.[217] The communication should be done before or at least at the time of the contract conclusion [218] and in a language the other party is familiar with.[219] In general, the party must be reasonably aware of the terms the other seeks to incorporate but how much information about standard terms must be communicated is less clear.[220]

I.10. Application of alternative sources for determining the terms of the contract on grounds of Art. 7 CISG, the UPICC and PECL

The UPICC and PECL, as explained in the introduction of this thesis, are international commercial instruments that are based on the CISG and therefore, can (and should) be used as sources of its interpretation based on Art. 7(1) CISG, and more importantly for gap-filling purposes under Art. 7(2) CISG. The value of the UPICC and PECL is that both offer explicit solutions for the battle of the forms and their application could lead to uniform solutions in disputes decided under the CISG.

a) Battle of the forms under the UPICC

The UPICC takes as a model Part II of the CISG on formation of contracts but it also has a set of rules regarding contracts with standard terms [221] and an explicit battle of the forms provision, offering the following solution in Art. 2.22:

"Where both parties use standard terms and reach agreement except on those terms, a contract is concluded on the basis of the agreed terms and of any standard terms which are common in substance unless one party clearly indicates in advance, or later and without undue delay informs the other party, that it does not intend to be bound by such a contract."

In this respect, the UPICC is much like the UCC. Starting from the assumption that the forms are not read in international commercial transactions, the UPICC attempts to overcome the inconvenience and the rigidity of the 'mirror-image' rule and the 'last-shot' doctrine adopting the 'knock-out' method in determining the terms of the contract. The provision is regarded to have a neutral effect mandating that neither party can impose clauses that, being contradictory, have not been agreed upon. Conflicting terms invalidate each other and are replaced by the solution offered by the applicable law.

As the UPICC in principle adopted Part II of the CISG, its rule on offer and acceptance would in fact lead to the application of the 'last-shot' rule.[222] However, in the presence of an explicate provision regulating the issue at hand, the application of the 'last-shot' rule remains appropriate only if a party clearly expresses its unwillingness to contract except on its standard terms coupled with negotiated terms.[223] The objection can be made in advance, by incorporating a general defense clause into the contract or afterwards, within a reasonable time. Hence, the contract may fail on the objection of one side or each side.[224] Incorporating a general defense clause among the boilerplate terms will normally not be sufficient. Where a party is unwilling to conclude the contract unless on its own terms, the declaring party should place its declaration among "non-standard" terms where the other party will most likely notice it.[225] Hence, any party may always derogate from the application of the 'knock-out' doctrine but only with an express declaration to that effect. Nevertheless, the 'knock-out' remains the principle rule for solving the collision between forms when the UPICC is applied.

Analyzing Art. 2.22 UPICC, the conditions for its application are the following: 1) it applies only when both parties use their forms in the course of contract conclusion; 2) there must be differences between some or all of the standard terms and an agreement on negotiated terms, at least on the essential elements of the contract.[226]

When forms are in battle, the UPICC creates a presumption that there is an agreement on negotiated and essential elements and disagreement on boilerplate and conflicting terms. Without an agreement on essential contractual elements, there is no contract as one of the conditions for the application of Art. 2.22 UPICC is not fulfilled. On the other hand, the UPICC presumes there is no consensus on colliding standard terms but there is on those terms that are common in substance. The presumption is subject to rebuttal.[227]

The UPICC contains a set of provision concerning contracts with standard forms, incorporating certain rules for individual clauses that have to be satisfied in order to become part of the contract. In case of conflict between standard and non-standard terms, the latter prevails (Art. 2.1.21 UPICC) as the most likely reflection of the parties' intention.[228] Moreover, it rules that no party is bound by surprising terms incorporated among standard terms, unless expressly accepted. Surprising terms are such that no party could have reasonably expected them by virtue of their content, language and presentation (Art. 2.1.20 UPICC). The UPICC thereby protects a contracting party from being bound by unfair terms incorporated amongst standard terms. Thus the UPICC recognizing the concept that a party should be bound by standard terms that it accepted regardless of knowledge of their contents, includes an "important exception" to this rule by relieving the party of the effect of standard terms which it should not "reasonably have expected" among the standard clauses. The provision serves the same purpose as § 2-302 UCC on unconscionable contract clauses, namely, to avoid hardship and unfair surprise of a reasonable party who under the circumstances did not expect such a term.[229]

b) Battle of the forms under the PECL

The provisions of the PECL on contract formation are similar to UPICC, distinguishing between the conclusions itself and the content of the contract. PECL, in its Art. 2:209, also contains a special provision on conflict of forms offering the following solution:

      (1) If the parties have reached agreement except that the offer and acceptance refer to conflicting general conditions of contract, a contract is nonetheless formed. The general conditions form part of the contract to the extent that they are common in substance.

      (2) However, no contract is formed

(a) if one party has indicated in advance, explicitly, and not by way of general conditions, that he does not intend to be bound by a contract on the basis of paragraph (1); or

(b) if later on, one party, without undue delay, informs the other party that he does not intend to be bound by such a contract."

As it can be seen, the offered solution for conflict of the forms is in its substance the same as Art. 2.22 UPICC, though it should be observed, PECL is more precise and detailed in case one of the parties declines to be bound by the 'knock-out' rule in Art. 2:209(2) PECL. The PECL also explicitly rejects the application of the 'last-shot' rule and accepts the principle that the terms of the contract are only those that are common in substance and supposedly agreed upon by the parties.

The PECL, like UPICC, have very similar rules on contract formation to the CISG, which would in fact lead to the 'last-shot' rule in the battle of the forms but derogates from it, with a special provision to that effect, explicitly rejecting the 'last-shot' and incorporating the 'knock-out' method in determining the terms of the contract.[230]

Unlike UPICC, the PECL expressly states that standard terms are enforceable only if the party who intends to rely on them took reasonable steps to alert the other party on their inclusion and made available their content before or the latest at the time of contract conclusion. A simple referral to standard terms is not sufficient, even if the other party signed the document.[231]

Any party can fail the validity of the contract by its unilateral action thereby derogating from Art. 2:209 PECL and the 'knock-out' rule therein, due to party autonomy in contractual relations, one of the main principles on which the PECL is based.[232] The objection should explicitly show the party's unambiguous intention to that effect. The PECL is more precise than the UPICC in this regard, stating that the derogation cannot be made by the way of a general defense clause in the respective party's standard terms.

The UPICC and PECL both have explicit provisions that deal with the issue of battle of the forms. Both incorporate the 'knock-out' rule in determining the terms of the contract but allowing one exception. If parties intend otherwise, the general rule might be derogated and the last or first shot rule applied, depending on which party incorporates the general defense clause into the contract. The drafters of the UPICC and PECL intended to escape the common factual situation, where lawyers drafting standard terms for their clients just needed to take care the contract "clearly indicates" their clients wishes to do business solely on their own terms by placing a clause to that effect among the standard clauses.[233] In practice, it will nonetheless be easy to attach the explicit declaration sought by the UPICC and the PECL. Practice could also react by a notice, prepared and attached to the declaration of will when concluding the contract which, expressly and clearly separated from standard terms, emphasizes the incorporation of one's own terms and rejects of any other standard terms.[234]

The UPICC and the PECL could serve as gap fillers but at least as interpretative instruments to the CISG as both have been modeled after the CISG and their main principles on contract formation are very similar to corresponding provisions of the CISG. It is important to emphasize that the general rules in contract formation in both instruments would lead to the application of the 'last-shot' doctrine in determining the terms of the contract. Yet the UPICC and the PECL incorporated an explicit derogation from the main rule for the battle of the forms. Therefore, observing the two international instruments, the CISG should follow the same path and apply the 'knock-out' rule in determining the terms of the contract by relying on Art. 7(2) CISG apply the provisions of the UPICC and the PECL on the battle of the forms.

CHAPTER II - BATTLE OF THE FORMS UNDER THE UCC

The UCC greatly reduces the formalism of contract formation and steps away from the common law rules. It rejects the 'mirror-image' rule thereby declaring it unsuitable for contemporary commercial relations, and instead, intends to deal with the battle of the forms. However, how and where this intention is manifested, can be determined only after an extensive inquiry into the drafter's intent. § 2-207 UCC attempted to embrace most of the problems arising in the course of contract conclusion, but as a result the provision on the formation of contracts has been characterized as a "statutory disaster"[235] leaving almost as many questions unresolved as it touches upon. This Chapter will try to bring some clarity into the chaos. After explaining and discussing the present solution under § 2-207 and all the practical consequences of its application, it will analyze the solution in the revised version of the UCC of 2003.

§ 2-207 UCC identifies contract formation in at least three routes: A) concluding contracts with definite and seasonable expression of acceptance which is not made expressly conditional on assent to additional or different terms, B) contracts via written confirmation, C) contracts created by the conduct of the parties. This Chapter will follow § 2-207 UCC and have the same structure in discussing its solutions. The provision of the new version of UCC of 2003 will be death with under D).

II. A. Formation of contracts via offer and acceptance

§ 2-207(1) UCC states a "definite and seasonable expression of acceptance … operates as an acceptance even though it states terms additional to or different from those offered …, unless acceptance is expressly made conditional on assent to the additional or different terms." The UCC took a liberal approach in contract formation by rejecting the 'mirror-image' rule and allowing contracts to be formed despite discrepancies in the terms in the offer and acceptance.[236] However, will every communication of the offeree be regarded as an acceptance?

II.A. 1. Rejection of the 'mirror-image' rule in § 2-207(1) UCC

§ 2-207(1) UCC rejects the common law 'mirror-image' rule and converts many common law counter-offers into acceptances.[237] According to § 2-207(1) UCC, the basic rule incorporated therein is that an acceptance operates as an acceptance even though it states terms additional to or different from those offered. Therefore, the UCC presumes the communication is an acceptance despite discrepancies in the terms.[238] However, rejecting the 'mirror-image' rule and focusing on the parties' intent does not mean a rejection of a requirement that there should be some objective manifestation of intent [239] or more accurately, a manifestation of a mutual assent.[240]

The prevailing view that commentators stand for is that § 2-207(1) UCC expressly rejects the 'mirror-image' rule.[241] The drafters of the UCC had the unexceptional purpose of overcoming the rigidity of one of the oldest and most mechanical common law rules of offer and acceptance, called the 'mirror-image' rule.[242] Moreover, the purpose of § 2-207 (1) UCC was not just to avoid the application of the 'mirror-image' rule, but to "abandon the very principle of a formal rule of offer and acceptance."[243]

According to Prof. Murray, § 2-207 (1) UCC does not destroy the rule but merely modifies it. Though he recognizes the language of § 2-207 UCC strike at the very heart of the common law 'mirror-image' rule, every court would apply the 'mirror-image' rule with respect to "dickered terms."[244] Where a response to an offer changes some essential element of the bargain, courts insist on applying the traditional 'mirror-image' rule, holding such a response is a common law counter-offer. Thus § 2-207 only modifies the technical application of the 'mirror-image rule' to prevent what is regarded as an acceptance from operating as a counter-offer simply because variant terms appear in the standard forms of the response (in the "undickered" terms). The statutory language does not state that such a response is an acceptance. Rather, it is said to operate as an acceptance because it would be so regarded by a reasonable offeror.[245]

Hence, even if the 'mirror-image' rule is not entirely rejected by the UCC, it will be regarded so if the battle of the forms occurs, where discrepancies solely appear among the pre-formulated clauses in the parties' standard forms.

However, not every communication even if purporting to be an acceptance, will amount to an assent. Two conditions have to be fulfilled: (1) The communication intended to be an acceptance has to be "definite"; (2) It should not be conditioned on the assent to the additional or different terms.

a) A "definite and seasonable expression" of acceptance

In general terms, under the UCC an acceptance has to be positive, unequivocal, absolute, and unqualified [246] in order to be definite. The mere use of the word "accept" does not automatically make a communication an acceptance.[247] However, a form response will not be considered a "definite expression of acceptance" just because the filled in terms match the filled in terms of the offer. It has to state explicitly that it is intended to be an acceptance, to contain an express language to that effect.[248]

The next issue is what kind of changes in the form language are tolerable so that the communication that contains additional or different terms still would be considered as a "definite" acceptance?[249]

  1. If the changes go into the essence of the bargain, when the divergence is significant [250] the communication will not amount to an acceptance. In contrast, when the alterations are only minor, the acknowledgement form will constitute a definite acceptance.[251] Nevertheless, by the language of § 2-207 UCC, the offeree's communication could amount to a "definite" expression of acceptance despite containing additional or different terms that would materially alter the offer.[252] The acceptance would be held definite, but the material term would not become part of the contract.[253]

  2. By another view, the word "definite" modifies the word "expression" and not "acceptance," and thus refers to the process of offer and acceptance and not to the terms of the acceptance itself.[254]

  3. According to a separate opinion, what matters is the intention of the parties (§ 2-204(3) UCC). However, failure to reach an agreement on essential elements of the contract will lead to a conclusion, parties did not intended to make a contract and lack commercial understanding to close a deal.[255] However, it is also argued when forms are in battle the law cannot resolve the issue by simple inquiry into the parties' intent. Parties deliberately failed to negotiate over terms that become subject of the dispute and intentionally left their mutual rights uncertain.[256]

Hence, if the major additional or different terms are boilerplate and the filled-in terms match, and additionally the acknowledgement form is intended to be an acceptance, the communication will be held as a "definite expression of acceptance", regardless of how much the boilerplate terms vary the offer, materially or immaterially.[257]

Though rarely disputed, the definite expression of acceptance has to be sent in a timely manner. Namely, an assent has to be manifested within the time specified in the offer [258] or if no time is specified therein, within a reasonable time after the offer have been received.[259]

b) Exception to the main rule - an "expressly conditional" acceptance

The offeree may not wish to be bound by the agreement unless the contract includes a particular provision suggested by it. In order to ensure the contract on its own terms, the offeree will make its acceptance expressly conditional on the offeror's assent to the additional or different terms in the acceptance. The offeree thereby sets forth certain terms without which assent it is not interested in making a deal. If the acceptance is made expressly conditional, it will be transferred to a new proposal, a counter-offer and there will be no contract without the agreement of the other party.[260] In case the offeror agrees, the contract is formed on the terms of the acceptance.

When is the acceptance made "expressly conditional" is one of the most controversial issues of § 2-207 UCC, constantly subject to litigation. There are two leading interpretations of a similar factual setting. One is the famous Roto-Lith v. FP Barlett & Co.[261] representing the first major decision on the issue and on the other side of the coin is Dorton v. Collins & Aikman Co.[262]

bi) The Roto-Lith approach

The dispute arose between Roto-Lith, a manufacturer of cellophane bags for packaging vegetables, and the defendant Barlett, a company for producing cellophane adhesives. The bags produced with such emulsion failed to adhere; hence Roto-Lith commenced an action for damages and the dispute arose around warranties.

Roto-Lith mailed an order containing the specification "End use: wet pack spinach bags" on which Barlett responded by sending an acknowledgement and invoice containing on their face: "All goods sold without warranties, express or implied, and subject to the terms on reverse side." The reverse side contained a further limitation of liability stating "if these terms are not acceptable, Buyer must so notify Seller at once," therefore making an attempt for exclusion of all warranties. Roto-Lith argued that taken together the acknowledgement, the invoice and the shipment of the goods constituted an acceptance within the meaning of §2-207(1) UCC and the warranty limitations were material alterations that were proposals for addition to the contract under § 2-207(2) UCC, which stayed outside the scope of the contract lacking Roto-Lith's express assent. Barlett, on the other hand, argued that the non-conforming acknowledgement made the acceptance expressly conditional on the warranty limitations and was in fact a counter-offer (§2-207(1) UCC), which Roto-Lith accepted by accepting the goods. The court accepted this argument, stating:

"We agree that §2-207 changed the existing law, but not to this extent. Its purpose was to modify the strict principle that a response not precisely in accordance with the offer was a rejection and a counter-offer. Now, within stated limits, a response that does not in all respects correspond with the offer constitutes an acceptance of the offer, and a counter-offer only as to the differences. If plaintiff's contention were correct that a reply to an offer stating additional conditions unilaterally burdensome upon the offeror is a binding acceptance of the original offer plus simply a proposal for the additional conditions, the statute would lead to an absurdity. Obviously no offeror will subsequently assent to such conditions … To give the statute a practical construction we must hold that a response which states a condition materially altering the obligation solely to the disadvantage of the offeror is an "acceptance expressly conditional on assent to the additional terms" and amounts to a counter-offer."

The court's logic was that if the response to the offer states additional or different terms which essentially alter the offer, but for the disadvantage of the offeror, it is not an acceptance but a new offer. Until now it would seem a fair and just construction, protecting the initial offeror from foreign terms and conditioning their validity on its explicit assent. However, by equalizing silence with an express assent, the court actually revived the 'last-shot' rule and left the initial offeror without protection. In the instant case, the court ruled that a purported acceptance may be made "expressly conditional" by implication from the fact that it contains additional or different terms that materially alter the offeror's obligation,[263] but without an explicit language to that effect.

bii) The Dorton approach

Ten years later a similar dispute arose. Dorton, a carpet retailer sued Collins & Aikman (hereinafter C&A), a carpet manufacturer for alleged fraud in the sale of carpeting.[264] When the action had been commenced, C&A asked for a stay of proceeding alleging the parties agreed to arbitration. In holding that there was no binding arbitration agreement, the court ruled:

"Although C&A's use of the words 'subject to' suggests that the acceptances were conditional to some extent, we do not believe the acceptances were 'expressly made conditional on [the buyer's] assent to the additional or different terms,' as specifically required under the § 2-207(1) proviso. In order to fall within this proviso, it is not enough that an acceptance is expressly conditional on additional or different terms; rather, an acceptance must be expressly conditional on the offeror's assent to those terms."

The court further concluded that, in light of the context of the instant case and the policies behind § 2-207 UCC, the provision would convert an acceptance into a counter-offer only where the offeree clearly reveals its unwillingness to proceed with the transaction unless it is assured of the offeror's assent to the different or additional terms. The condition that the acceptance is predicated on the offeror's assent must be:

"directly and distinctly stated or expressed rather than implied or left to inference … The phrase 'expressly made conditional' should be interpreted narrowly and §2-207(1) UCC applied strictly, because it is 'clearly designed to give legal recognition to many contracts where the variance between the offer and acceptance would have precluded such recognition at common law'."

Hence, the court concluded, the acknowledgement forms constituted an acceptance and not a counter-offer. The arbitration provision therein because of being a material alteration was held to be a proposal for contract modification, which had to be expressly accepted by Dorton.

c) Analysis of Roto-Lith and Dorton and the prevailing approach today

The ruling in the Roto-Lith case was the fist major decision on § 2-207 UCC from the time of its making and has been highly criticized.[265] It allows a result that § 2-207 UCC was designed to prevent, more accurately "it revives the 'last-shot' techniques available to an offeree under the common law 'mirror-image' rule."[266] By applying this approach, the offeror would be bound to the terms supplied by the offeree by performing his part of the bargain and staying silent.[267] Consequently, the initial offeror would have to read all the acknowledgements, invoices and bills of lading carefully, be prepared to negotiate further and reject the goods because of the new terms. This is unlikely to happen, as most buyers and sellers conduct several transactions a day or have unqualified personnel to deal with the issues at hand.[268]

Moreover, a clause placing a burden of affirmative objection on the offeror is in itself a modification that the offeror should assent to, but due to the lack of explicit assent any performance should invoke § 2-207(3) UCC and the 'knock-out' rule therein, instead of § 2-207(1) & (2) UCC.[269] On the other hand, as the court expressly acknowledged that the warranty disclaimer represents a material alteration, and if the "subject to" language would be neglected, it should have invoked § 2-207 (2b) UCC directly and excluded the disclaimer terms from the contract.[270]

In Construction Aggregates Co. v Hewitt-Robins, Inc.[271] which, according to some opinions, represents the middle of the spectrum between Roto-Lith and Dorton,[272] the court rejected the ruling in Roto-Lith and held the acceptance was a counter-offer due to the language "predicated on the following clarifications, additions or modifications to the order." The court pointed out, it if the acceptance contains additional or different terms to the disadvantage of the offeror, it will not automatically be a counter-offer; there needs to be something more.

The Dorton decision is more in line with the intent of the § 2-207 UCC, which conditioned the conversion of an acceptance into a counter-offer on the clear expression of the offeree's intent to that effect, communicated in a manner sufficient to notify the offeror, that it is unwilling to precede with the transaction unless the additions suggested by it are included into the contract. The focus of inquiry is on the explicit rather than the implicit intent of the parties.[273]

Dorton is the leading case, the precedent today,[274] though not always "blindly" followed. There are cases which in principle rely on the ruling in Dorton, but add or clarify what does "expressly conditional"[275] in practice mean, while others do not expressly follow either of the approaches.[276] The Roto-Lith holding have been overruled by the Circuit Court of Appeals only in 1997, in the case of Ionics v. Elmwood Sensors.[277]

II.A. 2. Some conclusions on § 2-207(1) UCC

After the introducing the subsection some essential conclusions have to be made before proceeding to determining the terms of the contract, to § 2-207 (2) UCC.

a) When is an acceptance "expressly conditional"?

The relevant language is "made expressly conditional" therefore what must be expressed is that the offeree is only accepting the offer if the offeror agrees to the additional or different terms. The conditional nature of the acceptance must be clearly expressed, with explicit language to that effect,[278] whereby the language of the offerees communication is strictly construed against finding such a condition.[279] If the clause does not state expressly that the acceptance is made conditional, courts will find that there is an acceptance without any condition.[280] Still, the language itself is not enough. For example, wording like "subject to all terms and conditions herein" is ordinarily understood to introduce an express condition,[281] yet in Dorton it was held not to create expressly conditional language.[282]

Despite the general tendencies, case law shows there is no "universal" solution; whether the acceptance is expressly conditional will depend on the number of factors. Factors like the words that were used, where they appeared in his form, whether they were printed, typed or handwritten, have to be considered along with the total commercial setting of the transaction, including course of dealing and usage of trade"[283] and the reasonable expectations and beliefs of the parties acting in that setting.[284] Words and conduct should be judged form the point of a reasonable man, whether he would under the same circumstances understand that the acceptance was in fact a counter-offer.[285]

b) A counter-offer or a proposal for contract modification?

It will be not always easy to determine whether the additional or different terms in the acceptance will be considered as proposals for contract modification or will transfer the communication into a counter-offer. Leaving aside the ruling in Roto-Lith, which would change almost every acceptance with additional language into a counter-offer, which is until now overruled, the precedent today, Dorton, failed to deal with the issue explicitly. The court in Gardner Zemke Co. v. Dunham Bush, Inc.[286] held Dorton gave a laudable rule in determining when an acceptance is made "expressly conditional" but failed to determine when an acceptance is a counter-offer. The court thereby ruled, it should be determined by taking into account the entire commercial setting of the contract in order to determine whether there was a "commercial understanding" of the deal. The determination requires a very fact specific inquiry. It requires consideration of the parties' activities and interaction during the making of the bargain; and when available, relevant evidence on the course of performance, course of dealings and usages of the trade. The question guiding the inquiry should be whether the offeror could reasonably believe that in the context of the commercial setting in which the parties were acting, a contract had been formed.

On the other hand, the ruling in Dorton could be interpreted in a way, that every acceptance that is made "expressly conditional" will amount to a counter-offer, which rule is also advised by the Restatement in § 59.[287] Hence, whether the offeree's communication is a counter-offer or a proposal for contract modification comes down on the interpretation whether there is an "expressly conditional assent." The issue is controversial, depending on the commercial context of the case but also on judges handling of the case.[288] Following Dorton, the language of the offeree's communication should be interpreted narrowly. Therefore, in the majority of cases the change will amount to a proposal for contract modification.[289] This interpretation is also in compliance with Official Comment 2.[290]

Hence, if an acceptance is made "expressly conditional", it should mean the offeree made some changes without which it is not willing to conclude a contract in any event; it should be held there is a counter-offer.[291] But can the acceptance be made expressly conditional on the assent to minor changes? The language of § 2-207(1) UCC is undetermined and could be read as referring to both material and immaterial alterations. However, according to the definition of counter-offer as a "substitute bargain",[292] only conditioning the offeror's assent to crucial changes should be sufficient to create a counter-offer.

In contrast, whether minor or major additions, if not expressly conditioned on the assent of the other party will amount to a proposal for contract modification and the faith of the terms therein will be decided by § 2-207 (2) UCC.

c) The principal question: is there a binding contract?

When contracts are concluded with pre-printed forms that are in collision, the two familiar "battle of forms questions" arise: whether there is a contract and if yes what are its terms? The answer depends upon when the objection is raised and also on whether there is a counter-offer or a proposal for contract modification and how the initial offeror reacts to the additions.

If the offeree's communication is sufficient to be characterized as a counter-offer and the objection is raised before there has been any performance, courts will hold that there is no binding contract formed.[293] If there was some performance and one of the parties invoked the discrepancy in forms, the court's standpoint will depend on the initial offeror's reaction. The situation is clear, if the offeror expressly agrees to the terms of the counter-offer, there will be a valid contract established on the terms in the new offer.[294] However, it is not a usual practical scenario. Parties usually perform without noticing the differences in the clauses. Only when a dispute arises does the question become important. The rule is, silence and inaction are not sufficient to constitute an acceptance. Nevertheless, if the offeror performs under the contract it contemplated was concluded, this could be some basis for determining its intent towards a binding contract, but perhaps its performance cannot be interpreted as an assent to the additional or different terms in the counter-offer. The only opposition for considering silence-performance as an assent is the 'last-shot' doctrine it would lead to.[295] That was exactly the result of the Roto-Lith ruling. However, since the clear intent of § 2-207 UCC is to reject the 'last-shot' doctrine, courts should find that, unless the offeror makes clear its intention to accept the terms of the conditional acceptance which amount to a counter-offer, that no contract has been formed upon the writings of the parties, and therefore, that the offeror's performance is not an acceptance. Rather, they should find, the contract was formed under § 2-207(3) UCC and apply the 'knock-out' rule in determining the terms of the contract.[296] Aims would be fulfilled, the contract would remain valid and the 'last-shot' doctrine rejected.[297]Courts will usually uphold the validity of the contract, applying § 2-207 (3) UCC, but a different interpretation is also possible [298]

If the offeree's communication is held not to be a counter-offer but an acceptance, and the objection to the discrepancies is raised before there has been any performance, by the wording of § 2-207(1) UCC there will be a binding contract, provided the discrepancies occur among standard clauses.[299] However, if there is no performance commenced and the offeror objects to a term it regards as crucial, courts could also rule there is no contract formed. After all, no harm would be done, and the parties could continue negotiations on the terms that are more favorable for them. Therefore, whether silence and inaction are sufficient for a binding contract is questionable. Finally, when there is a valid and binding contract, the additional or different terms in the acceptance become "proposals for contract modification", and their destiny depends on the provisions of § 2-207(2) UCC, which is invited to determine the terms of the contract.

II.A. 3. The terms of the contract (§ 2-207(2) UCC)

The UCC ended the battle of the forms in § 2-207(1) stipulating that, despite the discrepancies, contracts may be formed, and instead focuses on the task of determining under which terms the contract have been concluded according to § 2-207 (2) UCC. The additional terms become proposals for addition to the contract [300] and will become part of the contract unless a) the offeror expressly limits the acceptance on the terms of the offer, b) the new terms materially alter the terms of the offer, c) the offeror expressly objected to the changes incorporated into the acceptance.

II.A.3.1. Some observations on § 2-207(2) UCC

It is a mistake to think § 2-207 UCC deals principally with contract formation. Parties to sales much more often call on courts to use the provisions and decide the terms of their contract, which is a more difficult problem than determining whether there is a contract.[301]

Before examining under which conditions can the additional or different terms in the acceptance become part of the contract, it is necessary to make some observations and address a few controversial issues relating to the subsection itself.

a) The offeror is the master of the offer

Art. 2 UCC strengthens the common law rule that the offeror is the master of the offer and in general it favors the offeror.[302] The express provision to this effect is § 2-207(2a) UCC, according to which, provided the offeror expressly limits its acceptance to the terms of the offer, any additional term cannot become part of the contract. Similarly, if the offeror objects to any additional term in the response to the offer, § 2-207(2c) UCC precludes any additional term from becoming part of the contract.

b) Merchants versus non-merchants

§ 2-207(2) UCC, by its wording relates only to transactions between merchants.[303] Therefore, whether it governs transactions where non-merchants are involved is disputable.[304] The question is not very relevant in case of battle of the forms, which normally occurs between merchants. A consumer is unlikely to have its own form setting forth conditions under which it would be willing to do business, and almost any person in business would be held as merchant for the purposes of § 2-207 (2) UCC.[305]

c) Additional versus different terms

Under § 2-207(1) UCC, a positive response to the offer can be an acceptance "even though it states terms additional to or different from those offered or agreed upon." Whereas § 2-207(2) UCC states: "The additional terms are to be construed as proposals for the addition to the contract." Since § 2-207(2) UCC fails to mention the word "different", it opens a discussion and an endless disagreement whether subsection 2 encompasses both additional and different terms or just additional terms. But which terms are to be understood as different and whether every different term is also an additional term and vice versa, is questionable. By one simple explanation, different [306] terms are to be understood as contradictory, conflicting terms, while additional [307] terms more or less clarify the existing agreement.[308]

The additional/different term enigma is one of the most controversial issues surrounding § 2-207 UCC. In an effort to find a solution, three theories or approaches have been developed.

      1) One view is that § 2-207(2) UCC applies to both additional and different terms.[309] The foundation of this position is found in Official Comment 3 which does not differentiate between additional and different terms, providing: "whether or not additional or different terms will become part of the agreement depends upon the provisions of Subsection (2) (emphasis added)." It should be assumed that drafters did not deliberately intend to create confusion. If they deliberately intended to exclude "different" terms they could just easily have emphasized this intention in the statutory language or, at least, in the Official Comments.[310] Hence, the distinction is ambiguous and serves no clear purpose.[311] Dean Murray argues on the importance of including both additional and different terms into the scope of § 2-207 (2) UCC by pointing to the unfairness and unintended results a differentiation would lead to.[312]

      2) The second approach suggests that § 2-207(2) UCC is precluded from embracing different terms by virtue of its wording.[313] The ambiguity found in the treatment of "different" and "additional" terms is more judicially created than supported by the Code.[314] Drafters could easily add the words "or different" if they so intended.[315] Though, Official Comment 3, on which the fist approach relies, creates confusion, it has to be observed, it is not the UCC.[316] It would be difficult to view different terms in the acceptance as a proposal for addition to the contract if the offer already contains a contrary term. It is not possible to have different terms on the same subject as "part" of the same contract. It is argued § 2-207(2c) UCC would automatically invalidate the different term in the acceptance, since "notification of objection" would have already been given when the offeror included the contrary term in the initial offer.[317] The offeror thereby implicitly and in advance objected to any different term, whereby different terms fall out without having a chance to be considered as an immaterial alteration and therefore become part of the contract. Whether the result is good or bad will depend on the circumstances of the case. Prof. Summers supports this position.[318] Resolving the issue in this manner, however, not only fails to eliminate uncertainty, but it exacerbates confusion and complexity.[319]

      3) The third analysis arises from Official Comment 6, which states: "Where clauses on confirming forms sent by both parties conflict, each party must be assumed to object to a clause of the other conflicting with one on the confirmation sent by himself. As a result, the requirement that there be notice of objection which is found in Subsection (2) is satisfied and the conflicting terms do not become a part of the contract. The contract then consists of the terms originally expressly agreed to, terms on which the confirmations agree, and terms supplied by this Act, including Subsection (2)." As a result "different" terms cancel each other out and the applicable provisions of the UCC stand in their place. Despite the wording "confirming forms," the stated rule applies to contacts concluded by varying confirmation forms as well as variant offer and acceptance forms.[320] Prof. White advocates this approach as the most fair and sound.[321] The ultimate contract then consists of the non-conflicting terms in the standard forms with the missing provisions supplied by the parties' course of performance (§ 2-208 UCC), course of dealing (§ 2-205 UCC), usages of trade (§ 2-205 UCC) or any other provision of the UCC.[322] According to this view, the seller's form was only an acceptance of terms in the offer which did not conflict with any terms in the acceptance. The UCC does not expressly authorize this result, but Prof. White believes it does not bar it either.[323] With only a few recorded decisions construing § 2-207(2) UCC to include "different [324]," or limits to "additional" terms [325] most decisions agree, regardless whether additional or different terms are in question, the conflicting terms should knock each other out.[326]

II.A.3.2 Conditions for a reply containing additional or different terms to become an acceptance

The primary purpose of § 2-207(2) UCC is to provide a mechanism for reasonable standard clauses to become part of the contract concluded between merchants, unless the clauses are objected to.[327] The additional and/or/ different terms will become part of the contract, unless: a) the offeror expressly limits the acceptance to the terms of the offer, b) the new terms materially alter the terms of the offer, c) the offeror expressly objects to the new terms.

a) The offer expressly limits the acceptance to the terms of the offer (§ 2-207(2a) UCC)

If the offeror expressly limits the acceptance to the terms of the offer by incorporating a general defense clause, it is not willing to be bound by a contract unless the offeree accepts all the terms proposed by it. The objection to any potential additional or different terms has been made in advance, and the offeree has no choice, it can either take or leave the deal.[328]

b) Material versus immaterial modifications (§ 2-207(2b) UCC)

The UCC leads back to the familiar problem of considering the difference between material and immaterial changes. § 2-207(2b) UCC states that additional terms "become part of the contract unless … they materially alter (emphasis added)" the offer. Whether an additional term is a material or immaterial alteration has been the subject of considerable litigation.[329]

bi) Material alterations

A material alteration could be defined as an addition or change to contract that would result in surprise or hardship if incorporated without express awareness of the other party.[330] The primary purpose of § 2-207 UCC is the avoidance of oppression and unfair surprise, and the materiality of additional terms should be determined according to this test.[331] Actual (subjective) hardship is insufficient. The test is objective; the standard is that of a reasonable person, meaning, whether a reasonable party would be unfairly surprised under the circumstances. While "hardship" has often been viewed as substantial economic hardship,[332]and treated independently from "surprise",[333] there is a growing recognition that such an analysis may be flawed.[334] Simply because a contract requires performance that may be characterized as a hardship, it may still be an operative term of the contract if it is an "expected" term, if it lacks an element of objective surprise.[335] Hardship is a consequence of material alteration, not a criterion.[336] The burden of proving the surprise or hardship is on the offeror being the party opposing the term.[337] Official Comment 4 gives a list of clauses that should normally be considered material alterations.[338]

bii) Material alterations and fairness

The principle of avoiding hardship and unfair surprise also underlies the concept of unconscionability. Although, the UCC does not define unconscionability, the purpose of the concept is to prevent oppression and unfair surprise.[339]

There is considerable overlap between § 2-207 UCC and § 2-302 UCC.[340] The essential difference may be seen as avoiding unfair surprise and hardship as a threshold matter by precluding certain, materially altering terms from becoming terms of the contract ab initio under § 2-207 UCC. Whereas § 2-302 UCC allows courts to excise terms which already become part of the contract if their operation would cause unfair surprise or hardship to the party against whom they are designed to operate. Consequently, if standard terms, that are unfair, somehow become part of a contract, by the operation of § 2-302 UCC, under the doctrine of unconscionability, the terms could be excused under the assumption, they were not and could not have been truly assented to, but the contract remains valid.[341]

The doctrine of unconcionability is in close relation to another common law rule, the duty-to-read doctrine, which provides individuals with an incentive not to sign an agreement unless they read and understood it.[342] Both doctrines have been developed in relation to consumer contracts, but they also relate to transactions between merchants, though the exclusion of a clause as unconscionable will be granted exceptionally due to a general higher standard of care applicable to merchants in business dealings. According to the objective theory of contracts, courts search for a party's assent not by inquiring into his subjective assent but rather by looking at the party's conduct as it would be interpreted by a reasonable person.[343] Hence, it seems obvious that a reasonable person would have understood a signed agreement as an assent. Consumers can easily oversee or misunderstand clauses that later serve to their disadvantage, but in battle of the forms transactions, business people are involved, whose acts are estimated compared to a higher standard, a standard of a reasonable businessman. Business persons should be more careful in closing their deals and pay attention to the clauses, conditions of the contract, they agree to. The protection offered by § 2-302 UCC is available to merchants but courts will analyze a number of circumstances before granting, if at all, the exception. In Transamerica Oil Corp., v Lynes, Inc.,[344] when the seller attempted to exclude all implied and express warranties other than that products were free from defects in materials and workmanship, the court held:

"Nothing in the facts of this case renders the disclaimers unconscionable. Both parties are business entities with much experience in the oil and gas industry. Plaintiff does not appear to be in a substantially weaker economic position than defendants. There is no apparent excessive price. This is a commercial not a consumer setting. The language limiting remedies is on the back of the invoice form, but language on the front, in red print, refers to the terms and conditions of sale on the reverse side. The limitation of remedies appears in the first paragraph on the reverse of each invoice and is written in fairly large, legible print and stated in clear, concise language."

biii) Immaterial alterations

On the other hand, clauses that are incorporated into the forms, but lack the characteristics of unreasonable surprise and hardship, will be qualified as immaterial changes and become a constitutive part of the contract, despite being additional or different, unless notice of objection is seasonably given by the initial offeror. Official Comment 5 sets forth clauses that should be usually considered immaterial.[345]

biv) Distinguishing material and immaterial alterations in practice

The examples give in the Official Comments 4 & 5 are guidelines but are far from conclusive in differentiating material and immaterial alteration. They leave to courts the task of determining whether the factual situation in a case is more or less like the examples.[346] Courts appear to find any clause worth litigation to be material,[347] unless the clause would become part of the contract in any event, due to a trade usage or a prior course of dealing.[348] What may appear as a material alteration is not an alteration at all, material or immaterial, if it merely confirms an established trade usage or prior course of dealing.[349] In the latter case, the term becomes part of the agreement [350] ab initio.[351]

Hence, besides the objective test of hardship and surprise, whether there is a material or immaterial change will depend on particular circumstances of the case at hand and trade usages.[352]

In the case Oskey Gasoline v. OKC,[353] after a long-standing business relationship, parties concluded another contract for the sale of gasoline. The contract was prepared by the defendant and forwarded to plaintiff, who added the words "as computed in gross gallons," as specification for determining the quantity of the fuel, to the typewritten language of the contract and returned the signed copies to defendant. Defendant paying no attention, billed on a net gallonage basis and plaintiff remitted on a gross gallonage basis. Plaintiff and defendant had dealt on a gross gallons basis for some five or six months prior. This was the only quantity standard they had ever used in their dealings. Plaintiff claimed it never received product from any supplier any other way. Being aware of the circumstances, the court reasoned: "It seems clear that any 'common basis of understanding' must have been on a gross gallonage basis. It is obvious that this was the way plaintiff wanted to receive its product, and defendant was certainly aware of this desire." Consequently, the court determined, the added words would normally amount to a material alteration, since the difference in the standards, will result in a difference in price and quantity. However, since the intent of the parties was a gross gallons contract, which basically just confirmed their prior course of dealing, the words plaintiff added did not amount to a material alteration.

In practice, solutions differ. Some courts, though mistakenly, hold that alterations like warranty disclaimers are material per se just because they are held as such in the Official Comment 4, giving no consideration to particular circumstances of the instant case.[354] On the other hand, even the explicit language of Official Comment 5, declaring some alterations immaterial, have been sometimes disregarded and concluded, the change amounted to a material alteration per se because of its nature of shifting substantial risk to the buyer.[355]

The following clauses have been found material: warranty disclaimer;[356] warranty inclusion;[357] forum selection;[358] arbitration clause;[359]choice of law;[360]exclusion of consequential damages;[361] limitation of remedy;[362] substantial change of price term;[363] a cancellation clause.[364]

Provisions that were found to be immaterial are, for example: interest and attorney fee terms for collection of delinquent debts;[365]a clause limiting liability for consequential damages;[366] reasonable past due finance charges.[367]

To conclude, whether the addition is material or immaterial, will usually be a factual question that must be determined on a case-by-case basis, based on the facts of the case and the parties' expectations.[368]

c) The offeror's reaction on the changes, objection or silence (§ 2-207 (2c) UCC)

ci) The offeror objects

Additional terms in the acceptance, whether material or immaterial, will not become part of the contract if the offeror objects to that, in advance or within a reasonable time. The offeror is not bound to do business under terms that are not favorable for it, hence it can object to the terms it does not agree with and thereby retain control over the offer.[369] The provision creates for the offeror an equivalent power to the offeree's, whereby it can expressly condition its acceptance.[370] But what happens if the offeror stays silent on the changes?

cii) The offeror stays silent on the changes

Under § 2-207(2) UCC, the additions will become part of the contract unless the offeror expressly objects (in advance or thereafter) and the changes does not go into the essence of the bargain. According to Official Comment 6, if no answer is received within a reasonable time after the additional terms have been proposed, it is both fair and commercially sound to assume, they have been assented to. Hence, silence will be sufficient to constitute an assent.[371] Therefore, if the addition is a minor change it will be considered as a proposal for contract modification, which will become a contract clause despite the offeror's silence.[372]

If the change is material, it will raise the discussion whether the term is additional or different, and whether the different term falls under § 2-207(2) UCC. Setting aside the differences, by the wording of § 2-207(1) UCC a communication can be held as an acceptance even if it states additions that are material, and will become a proposal for contract modification. Therefore, if the offeror is silent on the addition, the communication will be further counted as an acceptance, but the addition therein will fall out under § 2-207(2b) UCC. When clauses in the parties' forms are in conflict, and the offeror is silent, courts will sometimes interpret that there has been an implied objection to the differing term in the acceptance. According to Official Comment 6, each party must be assumed to have objected to a clause, which is in conflict with the clause of the same content in its own form. As a result, a requirement that there be a notice of objection is satisfied and the conflicting terms fall out, but the contract remains valid.[373] Moreover, the silence of the offeror will be sometimes construed as an assent to the addition due to the previous course of dealing between the parties or a trade usage.[374]

The UCC does not contemplate the situation, where the offeror expressly gave its assent to materially altering additional or different terms. Official Comment 3 states, if the additional or different terms are such as to materially alter the bargain, they will not become part of the contract unless expressly agreed to by the other party. Therefore, relying on this interpretation and also the prevailing standpoint of the case law on the issue, it can be concluded, [375] § 2-207 (2b) UCC should be interpreted to the effect that material alterations become part of the contract if expressly accepted by the other party.

II. A. 4. 'First-shot', 'last-shot' or 'knock-out'?

Determining the terms of the contract under § 2-207 UCC is a complex task. After pointing to all the controversies that surround the section, it is time to answer, which theory is in fact applied in deciding the terms of the contract, whether it is the 'first-shot', the 'last-shot' or the 'knock-out' rule.

a) The 'first-shot' rule

An unguided reading of § 2-207 UCC leads to a false conclusion that contracts formed by § 2-207(1) & (2) UCC will be based on the terms incorporated into the offer.[376] The reason lies in § 2-207(2b) UCC, which allows contracts to remain valid despite additions in the acceptance, invalidating only the materially altering terms therein. Consequently, the terms of the contract will be those laid down in the offer, the first form that has been submitted.

To avoid the application of the 'first-shot' rule, § 2-207(1) UCC should be understood as relating only to contract formation whereas the terms are to be determined by § 2-207(3) UCC.[377] Courts also adopted this approach. If the acceptance is made "expressly conditional" and there is no explicit assent on the offeror's side, courts will hold, the writings of the parties did not establish a contract, but only the parties performance, and apply 2-207(3) UCC and the 'knock- out' rule therein. When neither form was made "expressly conditional", the form submitted first is usually the buyer's, which often includes terms from the Code. In the second situation, it practically makes no difference, whether the buyer's term or the Code's will prevail.[378] The result will be the same and the UCC's solution will be applicable.

b) The 'last-shot' rule

There are two possible "dangerous" situations when the 'last-shot' rule might be used. Firstly, courts could find an acceptance "expressly conditional" on the assent to additional or different terms under § 2-207(1) UCC and later find that the initial offeror agreed to the differences by performing under the contact but staying silent on the additions.

The second possibility for the application of the 'last-shot' rule in determining the terms of the contract follows from the first two approaches in determining whether subsection 2 relates to additional and/or different terms.[379] If the additional and/or different terms are considered to be proposals for contract modification, they will become part of the contract, even without an explicit assent of the offeror, unless the terms amount to a material alteration. The offeror's silence and performance will be held as a valid acceptance. Therefore, the terms of the contract will be those of the offer with the modifications contained in the acceptance. However, it has to be noted that the second approach will lead to a combination of the 'first-shot' and 'last-shot' rules in determining the terms of the contract, depending on whether the new term in question is considered to be an additional or a different term.[380]

c) The 'knock-out' rule

The application of the 'knock-out' rule in determining the terms of the contract, having contracts on joint terms in both forms supplemented by provisions of the UCC as gap fillers, was the drafters intention in creating § 2-207 UCC.[381] In the majority of cases, courts will indeed achieve the intended result, but due to the wording of § 2-207 UCC, there are bases for one of the parties to get an unearned and unfair advantage, being it either a person who sent the first or the last document.[382]

II. B. Battle of the forms after an oral contract - contracts via written confirmations

In many cases the parties first reach an oral or other informal agreement covering the essence of the deal and thereafter, one or both sends a "confirmation" form that includes terms different from or additional to those previously agreed on orally. As usually, parties perform without reading the fine print. If a dispute arises, the questions are: Is there a contract? If yes, what are its terms?

§ 2-207(1) UCC states: "A definite and seasonable expression of acceptance or a written confirmation ... operates as an acceptance even though it states terms additional to or different from those offered or agreed upon …" (emphasize added). Whether the contract is formed via written confirmations is determined under § 2-207(1) UCC but its terms under § 2-207(2) UCC.[383] Solutions differ, depending on whether forms are intended to confirm or to replace the oral contract.

a) Forms intended to confirm the oral contract

In a common factual setting, an agreement can be reached orally and later confirmed in writings of the parties that disagree over certain terms. § 2-207(1) UCC stipulates, a written confirmation can operate as an acceptance [384] even if it contains additional or different terms. Once a valid contract is concluded, any attempt to change its terms invokes the application of § 2-209 UCC on contract modification and § 2-207 UCC ceases to be applicable.[385] § 2-209 (3) UCC provides, the statute of frauds § 2-201 UCC,[386] which sets forth formal requirements for a valid contract. The first conclusion would be that read together § 2-206 UCC, § 2-204 UCC and §2-201 UCC, contracts concluded orally are valid, but not enforceable.[387] However, Prof. Murray argues that the battle of the forms and the statute of frauds are two distinct issues and should not be confused. The challenge concerning the variant terms is a "battle of the forms" problem exclusively and there is no longer any Statute of Frauds issue.[388] The wording of § 2-207 UCC supports the argument, expressly incorporating the issue of confirmation forms into its scope. On the other hand, it is also sometimes argued that a contract formed by written confirmations is not a battle of the forms issue at all.[389] The argument is supported by Official Comment 1, which states, § 2-207 UCC is intended to deal with two typical situations. One is, when the agreement has been reached orally and later confirmed in writing and the other, when the correspondence itself establishes the contract, whereas the battle of the forms falls under the second situation.[390] Therefore, when referring to confirmations, § 2-207(1) UCC contemplated prior informal contract later confirmed in writing, but not the battle of the forms via written confirmations.

The argument is valid, and perhaps underlies the drafter's intention; it does not embrace a common practical setting. Very often parties reach an oral agreement and later exchange their non-confirming forms. Hence, the contract has been concluded orally and was not established by written confirmations, but due to differing boilerplate terms the forms were in battle. As according to Official Comment, the battle of the forms occur only by an exchange of a non-confirming offer and acceptance forms, which at the same time establish the contract (contract formation via offer and acceptance), what will happen with situations like the present? If not by referring to § 2-207 UCC, how can the conflict be resolved and the terms of the contract determined?

The oral contract remains valid and the court's inquiry is not about whether a contract exists.[391] The only question is what happens with the additional or different terms in the confirming forms.[392]

The terms of the contract will be those agreed to orally. What is important is that a written confirmation will always amount to a proposal for contract modification, as the expressly conditional language in § 2-207(1) UCC does not refer to written confirmations [393] and it is too late for a counter-offer.[394]

Any additional and minor change will become part of the contract unless the other party expressly objects (§ 2-207(2a) & (2c) UCC) to its inclusion but essential alterations will only become part of the contract if the other party explicitly accepts the alteration.[395] Normally, essential alterations will fall out (§ 2-207(2b) UCC). The original contract, concluded orally, would thereby be enriched with a new, additional term incorporated into the confirmation form, having a retroactive effect.[396]

When a confirmation states a term different from the original oral agreement, the different term falls out. The benchmark for determining whether the term is additional or different is the prior agreement, not the other confirmation form.[397]

b) Forms intended to replace the oral contract

When the contract is concluded orally and the forms exchanged later, with an intention to replace the oral contract, incorporating major changes to the previous agreement, the new contract will be subject to all formation provisions of the UCC (§ 2-204, §2-206, § 2-207) subject to the Parol Evidence Rule (§ 2-202 UCC). The rule itself is simple: if parties have reduced their entire agreement to writing, parol (oral) evidence cannot be given to contradict, alter or vary the written document.[398] However, its practical application is more complex than it seems. Without going into the particularities, courts have to establish the factual question,[399] whether parties intended that the exchange of standard forms constitute a final expression of their agreement.[400] The terms of the contract will be those that are written and may not be contradicted by evidence of a prior oral agreement but might be supplemented by a course of performance, course of dealing, or usage of trade [401]

II. C. Agreement by conduct (§ 2-207(3) UCC)

The UCC provisions on contract formation are liberal and flexible whereby a contract can be formed in any manner sufficient to show agreement (§ 2-204(1) UCC) and even without an assent to all the terms of the agreement (§ 2-207(1) UCC), emphasizing the parties' intent as a key in finding a contract.[402] Therefore, when parties exchange their forms, but because of the discrepancies in the terms therein the writings themselves are not enough to establish a contract, courts will find there is nevertheless a binding contract, provided the parties performed at least some of their obligations under the contract they contemplated was validly concluded. § 2-207(3) UCC states: "Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract." 

Hence, a contract can be established with the parties conduct applying § 2-207 (3) UCC, without identifying the exact offer and acceptance in their correspondence. However, the provision is only applicable if both parties performed under the contract thereby manifesting their mutual intent towards a binding contract,[403] but a previous exchange of writings in which they failed to reach an agreement is necessary, otherwise the proper analysis focuses on § 2-204 UCC.[404]

If the above two conditions are fulfilled, § 2-207(3) UCC established the terms of the contract which consist of "those terms on which the writings of the parties agree, together with any supplementary terms [405] incorporated under any other provision of this Act."[406]

Prof. Wladis is even of the opinion that provided § 2-207 explicitly deals with the battle of the forms,[407] § 2-207(3) UCC is invited to give a solution.[408] Or, in other words, if the parties' forms are in a battle, the solution can be found only relying on § 2-207(3) UCC. According to him, the use of the term "battle of the forms" is limited to a situation when there is no prior agreement between the parties and should not be confused with the situation where there is an oral agreement and the parties later exchange their writings, sometimes also in the form of form contracts.[409] He describes the problem as, one party made a form offer and the other responded with its own form containing additional or different terms, following which parties performed.[410] It has to be noted, Prof. Wladis was analyzing the drafting history of § 2-207 UCC in order to determine the drafters' intent as guideline to proper interpretation of the confusing § 2-207 UCC. However, even if his interpretation is the correct one, he himself admits the drafters failed to explain clearly how to apply § 2-207 UCC.[411] Consequently, besides all other controversial elements of the provision, there is an ongoing disagreement between courts and commentators when should § 2-207(3) UCC be applied,[412] and should it be used alone or in combination with the other subsections of § 2-207 UCC. There are two diverging opinions on the application of § 2-207(3) UCC:

1) § 2-207(3) UCC should be invoked when, for any reason, no contract was formed under § 2-207(1) UCC but the parties' subsequent conduct recognized the existence of the contract [413] This approach is consistent with a literal reading of the subsection.

2) The second approach is much narrower. According to it, if no contract is formed under § 2-207(1) UCC because the offeree's reply is not a "definite expression of acceptance," but the parties nevertheless performed, § 2-207(3) UCC applies. However, if no contract is formed under § 2-207(1) UCC because the reply, though a "definite expression of acceptance," was "expressly made conditional" on assent to the variant terms, which has been never expressly assented to, regardless of the parties later performance, § 2-207(3) UCC is not applicable due to the lack of a clear meeting of minds. The offeree's communication should be treated as a common law counter-offer, and the offeror's subsequent performance an assent to the offeree's terms [414] thereby resulting in the 'last-shot' method in determining the terms of the contract. However, the rule in § 2-207(3) UCC was designed to preempt the 'last-shot' rule opting for the 'knock-out' method.[415]

Even if § 2-207(3) UCC applies, the other unresolved problem is, whether it applies alone to a given contract or in combination with § 2-207(1) & (2) UCC. The prevailing standpoint is, § 2-207(3) UCC applies only if a contract is not found under § 2-207(1) UCC.[416] Once there has been an effective contract under 2-207(1) UCC and the full terms of the agreement have been established under § 2-207(2) UCC, it is erroneous to resort to § 2-207(3) UCC. § 2-207(3) UCC does not apply if the contract is already formed.[417] It serves to cure the initial flaw and gives effect to the parties intent towards a binding contract which they demonstrated by performing at least some of their obligations. Usually, but not exclusively, § 2-207(3) UCC is applied when the writings of the parties did not establish a contract because the acceptance was made "expressly conditional" on the offeror's assent and the offeror failed to agree explicitly but commenced performance.[418] There are other combinations of subsections of § 2-207 UCC, though they usually appear as a result of the judge's mistaken handling of the instant case.[419]

It is important to note that § 2-207(3) UCC is applicable when the contract is concluded via conduct of the parties and should not be confused with Prof. White's approach (the third approach) in determining the faith of the additional or different terms in the acceptance and thereby the terms of the contract. In both cases, the result is the same, the application of the 'knock-out' rule, but the way of getting there is essentially different. In deciding what will happen with the additions in the acceptance, the existence of the contract is determined by relying on § 2-207(1) UCC. Once there is a valid contract, the conflicting terms will fall out (basically under § 2-207(2b) UCC) based on the assumption the parties agreed only to the terms that are not in conflict. On the other hand, when the parties form their contract via conduct, there is no contract under § 2-207(1) UCC; § 2-207(3) UCC "rescues" the agreement from failing for lack of mutual assent and at the same time it gives guidance in determining the terms of the contract.

Though the drafters intention might have been to apply § 2-207(3) UCC (exclusively) for the battle of the forms, practice proved differently. The subsection is invoked in most cases where there has been performance of the parties but no valid contract under § 2-207(1) UCC, because the acceptance had been made expressly conditional and there was no explicit assent of the offeror, just its performance. All in compliance with the policy of § 2-207 UCC to keep the agreement whenever it is possible without imposing on one of the parties materially altering terms, and with the aim to abandon the common law 'mirror-image' rule and its accompanying 'last-shot' rule.

The provision that is mostly litigated is § 2-207(2) UCC, it being unclear when terms should be considered additional or different, material or immaterial. Hence, in battle of the forms litigation, courts usually invoke the combination of § 2-207(1) UCC with § 2-207(2) UCC. Only if they find no contract under § 2-207(1), will courts reach at § 2-207(3) UCC.

II. D. A compelling need for revision of § 2-207 UCC and the new solution

Commentators disagreed on many issues surrounding § 2-207 UCC but on one they were in unanimous agreement, the section needed redrafting!

II.D. 1. The reasons and process of redrafting § 2-207 UCC

a) Criticisms of § 2-207 UCC

§ 2-207 UCC intended to make a significant departure from the common law rules. However, in what it succeeded is a creation of new and sometimes difficult problems of its own.[420] The provision has been highly criticized and called a "technical monster,"[421] it has been also stated: "The only thing clear about the section is that it remains unclear … a section that raises as many questions as it answers." [422] "There should be no doubt that 'chaos' is an accurate characterization of the state of law in the 'battle of the forms' arena." [423] § 2-207 UCC is "like an amphibious tank that was originally designed to fight in the swamps, but was sent to fight in the desert." [424] It has been even pointed out, that § 2-207 UCC is one of the main reasons for the serious consideration that is being given to revision of Art. 2 UCC! [425]

After the section had been much criticized and after a detailed discussion of all of its flaws, the question emerges, how did the section indeed work in practice? Bard and Weisberg [426] researched the issue and concluded, § 2-207 UCC worked fairly well in practice. Though the provision itself is badly drafted, it has been applied consistently in practice, ruling in compliance with the underlying policy of the UCC and the intention of the drafters, to preserve the contract whenever it is possible and to favor neither party in determining its terms. However, Dean Murray disagrees with the conclusion. According to him, courts have been inconsistent in trying to apply § 2-207 UCC. Reaching fair results was subject to coincidence. Everybody who tried to deal with the section got confused, consequently even the Official Comments and Restatement are useless in bringing some clarity.[427]

The conclusion of this research is twofold. On one hand, court decisions indeed in the great majority of cases followed the drafters' intention, rejecting the common law 'mirror-image' rule and the 'last-shot' method. On the other hand, confusion cannot be negated, even after much litigation that arose regarding the section, certainty does not exist! The language of the section allows different solutions which sometimes occur in practice. Therefore, it can be concluded, in general, the current § 2-207 UCC is too technical, arbitrary, and uncertain in its outcomes.[428]

b) Models for revision of § 2-207 UCC

The need for revision was compelling, the only question that remained is: how it should be done? Commentators begun to deal with the question before there has been official steps taken to this effect, advocating different "best" solutions:

bi) Search for the parties' "true understanding"

Dean Murray follows Karl Llewellyn's, the "father" of the UCC and principle draftsman of Art. 2, vision to have a contract law that overcomes technical constrains and emphasizes the "true understanding" of the parties that discovers their factual bargain.[429] The UCC should steps away from formal rules, notions of classical contract law that focus on the precise language in the parties' documents. Instead it should invite courts to look at all available evidence to establish the bargain in fact, including course of dealing and trade customs. The true agreement is a living organism that is subject to modifications through the parties' expressions and conduct. According to Dean Murray, this underlying principle should be kept in the new version of § 2-207 UCC as well, but it should be more precise in identification of the parties real intent, as this is the only route to fairness in contractual relations.[430] Rejection of technical requirements not only should continue to exist but should be enhanced to remove the remaining impediments. Real people who make millions of real deals every day should be in focus. The identified factual bargain should be constrained only by the normative standards of honesty in fact, commercial reasonableness (for example "good faith") and conscionability. Violations of any of these standards evidences an "indecent" bargain that should not be enforced as a contract. "It is time to remember the evils that Art. 2 sought to avoid and provide effective, rather than covert tools, to remedy those evils in the battle of the forms." [431]

bii) Revival of the 'mirror-image' rule

Baird and Weisberg opt for a more formalistic approach [432] and argue that the 'mirror-image' rule should be brought back, beating with arguments all the known flaws of the rule [433] and emphasizing its advantages. The UCC gives no incentive to bargain over the terms, when mostly the provisions of the Code will be applied, which can be equally unsuitable to the interest of, at best, one of the parties. The 'mirror-image' rule would force the parties to read the forms being aware its terms could become part of the contract even if ignored. Under any legal provision, including the 'mirror-image' rule, market forces greatly reduce a merchant's ability to use wholly biased, pre-printed forms consequently; boilerplate terms will generally be fair and acceptable. Suitable terms would become part of the contract without significant increase in negotiation costs. According to the authors, the present UCC places generally too much emphasize on the parties' intent in determining the terms of the contact whereas, where standard forms are involved, there is no way of knowing whether the parties intended to enter into a contract regardless of the discrepancy in the terms.[434] Hence, the authors opt for the old, certain and according to them, not as much rigid as believed, 'mirror-image' rule, showing it will produce the same, if not, better results than § 2-207 UCC .[435]

Besides the two main and opposing solution suggested by Dean Murray and Baird and Weisberg, there are other proposals, suggesting a new approach in solving the issue of battle of forms. For example, Prof. Goldberg advocates the "best shot" rule. Having not much faith in the default provisions of the UCC and believing the previous therein often does not serve the parties' advantage, he advocates, courts faced with conflicting terms, must choose one form based on the criterion of the overall "fairness." The rule would encourage parties when drafting standard forms to take into account the interest of others. Though he admits, operationalizing fairness would be difficult.[436]

c) The revision process

The predecessor of the revision was the Study Project approved by The Permanent Editorial Board of the UCC and ALI in conjunction with the NCCUSL, to consider whether Art. 2 should be revised, and to identify "major problems of practical importance" in its interpretation and application.[437]

The Study Project has been completed in 1990 and only a year thereafter the NCCUSL decided to realize the revision, to adjust Art. 2 UCC to the demands of modern commerce. Two successive drafting committees have worked ardently on the revision project, producing more than a dozen detailed drafts. The final draft has been announced on August 5, 2002 containing a rather modest set of amendments,[438] but a complete change of § 2-207 UCC.

2. § 2-207 of the revised UCC from 2003 - The new § 2-207

The amended provision reads the following:

§ 2-207 Terms of Contract; Effect of Confirmation

Subject to Section 2-202, if (i) conduct by both parties recognizes the existence of a contract although their records do not otherwise establish a contract, (ii) a contract is formed by an offer and acceptance, or (iii) a contract formed in any manner is confirmed by a record that contains terms additional to or different from those in the contract being confirmed, the terms of the contract are:

(a) terms that appear in the records of both parties;

(b) terms, whether in a record or not, to which both parties agree; and

(c) terms supplied or incorporated under any provision of this Act.

a) General remarks

This section applies to all contracts for the sale of goods, and it is not limited only to those contracts where there has been a battle of the forms.[439] The section applied only when the contract has been created under some other provisions of Art. 2 of the NUCC, as the section apply only for determining the terms of the contact.[440] The separation of contract formation from the establishment of the terms of the contract is a major improvement. The terminologies have also changed designed to accommodate electronic commerce.[441] We no longer talk about battle of the forms but the battle of the records.[442]

b) Formation of contracts under § 2-204 and § 2-206 NUCC

The structure of Art. 2 UCC approach has been preserved.[443] Contract formation in general is set forth in § 2-204 NUCC, according to which contracts can be formed in any manner sufficient to show agreement. In addition to traditional contract formation by oral or written agreement, an agreement may be made by electronic means.[444] The rejection of the 'mirror-image' rule has been transferred to § 2-206 (3) NUCC dealing with an offer and acceptance in contract formation. According to the subsection, "a definite and seasonable expression of acceptance in a record operates as an acceptance even if it contains terms additional to or different from the offer." The main principle of § 2-207(1) UCC has been kept, that a contract can be formed without an exact match between the parties' communications.

However, even if the 'mirror-image' rule has been rejected, any responsive record must still be reasonably understood as an "acceptance" and not as a proposal for a different transaction.[445]

The concept that a party may prevent contract formation by the inclusion of a clause that expressly conditions formation of a contract on acceptance of the terms stated in that party's record, is left out from § 2-206(3) NUCC but is preserved through the proposed comment to the amended § 2-207 NUCC.[446] According to the Official Comment, an expression of acceptance has to be "definite." A purported expression of acceptance containing additional or different terms would not be a "definite" acceptance when the offeree's expression clearly communicates to the offeror the offeree's unwillingness to do business, unless the offeror assents to those additional or different terms. This is not a definite acceptance since the offeree's expression makes it clear that the offeree is not "accepting" anything; but rather that the offeree is indicating a willingness to do business only on the offeree's terms, and that the offeree is awaiting the offeror's assent to those terms."[447] Hence, when the offeree makes its acceptance "expressly conditional," courts should in any case find, there is no definite acceptance, and thereby no contract. On the other hand, when the offeror clearly indicates that it is unwilling to do business on any terms other than those contained in the offer, and the offeree responds with an expression of acceptance that contains additional or different terms, courts could also conclude that the offeree's response does not constitute a definite expression of acceptance.[448]

Therefore, when one party conditions contract formation on its own terms, if that party does not subsequently perform or otherwise acknowledge the existence of a contract, there will be no binding contract under § 2-204 NUCC or § 2-206 NUCC, and § 2-207 NUCC will not be applicable.[449]

Even though the solution from § 2-207(1) UCC regarding conditional acceptances has been retained, according to Maggs, the need to address this problem has largely disappeared due to created precedents on the problem. Namely, in the past years, over a dozen cases have considered the question, and they all have accepted the Dorton view. However, even he admits judicial precedents are sometimes not enough.[450]

c) § 2-207 NUCC and the terms of the contract

After the contract has been formed under § 2-204 and 2-206 NUCC either by conduct of the parties, offer and acceptance or in any manner later confirmed by a record (§ 2-207 NUCC), § 2-207 NUCC focuses solely on determining the terms of the contract.

In case of the battle of the forms, the terms of the contract will be those that appear 1) in the records of both parties or 2) terms, whether in a record or not, to which both parties have agree to, and 3) any gap will be filled by terms supplied or incorporated under the NUCC.

ci) Terms in records of both parties (§ 2-207(a) NUCC)

The objective of the new provision is not to give effect to either the first or the last form of the parties' exchange thereby in principle incorporating the 'knock-out' rule in determining the terms of the contract.[451] The subsection testifies that writing prevails in § 2-207 NUCC. In a genuine battle of the forms situation, where the parties have exchanged forms containing inconsistent terms and later performed giving no attention to discrepancies, courts will just have to compare the writings of the parties and the terms would be those that match in both parties' forms, most likely the negotiated terms. Additional or different boilerplate terms would fall out and would be replaced by default rules of the NUCC. Unfortunately, the situation is not that easy, because the next subsection allows exceptions.

When the inconstant terms are found attached to the goods, or in or on the container in which the goods are delivered,[452] or when the contract is concluded orally and later confirmed with inconsistent writings of the parties, the rules would be the same in determining the terms of the contract.[453]

cii) Terms to which both parties have agree to- whether in record or not (§ 2-207(b) NUCC)

Subsection b is intended to give effect to genuine bargain of the parties. It attempts to make an exception from the main rule, and allow certain terms to become part of the contract. What the provision leaves open which terms can be considered to become part of the contact and when is an agreement to their inclusion reached.

1) Terms that are eligible for becoming part of the contract

Determining which terms can be considered as agreed at by the parties, according to the wording of § 2-207 NUCC, is subject to the Parol Evidence Rule in § 2-202 NUCC. Initially, courts will have to determine whether the parties' records are final, complete and exclusive relying on their discretion and all available evidence.[454] If a record is final but not complete and exclusive, it cannot be contradicted by evidence of prior agreements reflected in a record or prior oral agreements, but it can be supplemented by other evidence of consistent additional terms drawn from any source. If the record is final, complete and exclusive, it can be supplemented by evidence of non-contradictory, additional terms drawn from an applicable course of performance, course of dealing or usage of trade unless those sources are carefully negated by a term in the record, but it cannot be supplemented by evidence of terms drawn from other sources, even terms that are consistent with the record.[455]

Neither § 2-207 NUCC nor the Official Comment makes any direct mention of the difference between material or immaterial terms and does not give any guidance as to when the alteration to be considered material and when immaterial. However, from Official Comment 3 it can be derived, on terms that are crucial for the bargain the parties will have to reach an express agreement. Not only the contract cannot be supplemented by later performance of the parties or supplied by default provisions of the NUCC, but if there is no agreement on crucial terms there will be no contract at all.[456]

The well-known dilemma between the additional or different terms is equally not addressed in the NUCC, but the use of the terminology continued. What differs now, that the terms are used consistently in § 2-206(3) NUCC and § 2-207(iii) NUCC, referring to "terms additional to or different from." However, Official Comment 3 uses the terms inconstantly, once talking about additional terms and later mentioning additional or different terms. Also § 2-202 (2) NUCC might cause confusion talking only about "consistent additional terms" that might supplement the parties' records. Hence, it can be concluded, the confusion surrounding the additional or/and different terms continues. One of the possible and very logical readings is that despite additional or different terms in the acceptance there will be a binding contract, but only additional terms can become part of the contract, due to a limitation imposed by § 2-202(2) NUCC, and the contradictory terms fall out.

2) Consent of the parties - the main criteria

What is controversial and will be in the heart of interpretation of the courts is, whether the parties have agreed to a term that is not reflected in both parties' records.[457] In determining the parties' intent, courts will have to look at the whole context of the contract conclusion, focusing on a variety of verbal and nonverbal behavior,[458] course of performance, course of dealing, and usage of trade.[459]

Official Comment 3 reinforces that if new terms are immaterial and additional, performance or even silence will be sufficient to create a contract,[460] unless there is an explicit objection by the other party.[461] On the other hand, if the alteration is material it will become part of the contract only with an explicit assent by the other party, provided the term does not go to the core of the bargain.[462] As the situation with additional or different terms is not clarified, different, inconstant terms will generally not become part of the contract by mere performance and/or/and silence of the party. If they are eligible to be incorporated into the contract, an explicit assent to their inclusion will be required. However, factual situations are endless, and courts handling cases are left with a "wise discretion" to determine whether the parties' behavior amounted to an agreement.[463] On the other hand, § 2-207(b) NUCC is the expression of the NUCC's underlying policy to search for the parties' bargain, in fact, their true understanding. In pursuing that aim, it should be considered whichever the term at hand is, if there is an explicit agreement by both parties or at least an express assent by the party whose disadvantage the terms might serve, and if yes, the term becomes part of the contract. After all, parties are allowed to create their business relationships according to their aspirations.

ciii) Filling in the gaps by terms supplied or incorporated under the NUCC (§ 2-207(c) NUCC)

The NUCC is more precise that its predecessor stating terms "supplied or incorporated" whereas the UCC stated only terms "supplied". Hence, there is no doubt gaps may be filled by any term of the NUCC or by any term that could become part of the contract indirectly, through course of performance, the parties' dealings or usage of trade.

What is also important and new, § 2-202 NUCC has been amended to clarify that finding ambiguity in a term is not a prerequisite to an admission of evidence of a course of dealing, course of performance, or usage of trade for the purpose of explaining the term.

d) Is § 2-207 NUCC really "new"?

After a brief survey of § 2-207 NUCC and the solutions therein, the question that emerges is, is the provision really new compared to § 2-207 UCC? Does it make substantial changes into the battle of the forms?

The NUCC follows the underlying principle of the UCC. It rejects the 'mirror-image' rule to keep the existence of the contract whenever possible. Major improvements are: leaving behind the imprecise language and controversial subsection 2, divorcing contract formation from determining the terms of the already formed contract, and being clear, in determining the terms of the contract, the 'knock-out' rule should be applied.

However, NUCC eliminated some controversies but added potential others. Adopting Dean Murray's proposal for revision, in pursuing the parties "true understanding" as an ultimate goal, § 2-207(b) NUCC has been added, thereby giving courts a new tool for divergent interpretations.[464] Even if the provision appears simple at first sight and completely rewritten, deeper analysis usually leads to the same practical results, leaving the same problems unanswered in determining the terms of the contract as the UCC. As the previous or more accurately present § 2-207 UCC was not intended by its draft ers to give complex and complicated solutions, only practice will adequately answer whether § 2-207 NUCC is truly new or just carefully reformulated.

CONCLUSION

After detailed analysis of Art. 19 CISG and § 2-207 UCC, structuring scholarly arguments and practical solutions, the main conclusion is: there is no certainty, stability and predictability when the parties' forms are in battle. As Dean Murray said: "There should be no doubt that "chaos" is an accurate characterization of the state of law in the battle of forms arena."[465] After many years of uncertain legislative regulation, practice adapted to the situation by developing different techniques to end the battle of the forms. These notions lead some commentators to state, the issue is commercially irrelevant. After exploring whether the issue is indeed irrelevant, the two solutions under the CISG and the UCC will be compared giving at the end the major findings and proposing a uniform solution to the issue of battle of the forms.

1. Is the problem of colliding standard terms commercially irrelevant?

The use of standard forms and standard terms therein progressively overtook the marketplace. According to one (even not very recent) survey, 64% of all commercial contracts are concluded with the use of standard terms, more accurately 73% for buying and 57% for selling industrial products.[466]

When both parties use their standard forms in the course of contract conclusion, the problem of battle of the forms inevitably arises as the standard terms in the parties' forms are never in harmony. However, in most cases paying no attention to discrepancies in standard terms, contracts are performed voluntarily and disputes are rare.

On the other hand, being aware that battles of forms might arise, large corporations developed different routines to avoid the battle. The practice of IBM Canada is a good illustration, reported in 1980 by its Vice-President Grant G. Murray.[467]

"IBM used two types of contracts, one for selling and one for buying products.

"A significant portion of IBM's revenue came from selling its products. To facilitate its marketing activities and to ensure sales contracts are concluded under favorable terms, IBM developed an extensive set of standard forms that reached a total number of 205! [468] The number of contracts that covered the outright sale of IBM's products amounted to approximately 60,000 each year.

"In Data Processing and General Systems Division where the value of contracts were substantial and represented major investments for the company, IBM did not intend to be concerned with the battle of the forms. It refused to accept any order unless the customer signed the standard IBM agreement or it accepted the order by last signing the document, but did not take customer purchase orders nor used orders that it sign first and than sent to the customer for acceptance. IBM was less rigid in Information Records Department where it occasionally allowed exposure to the possibility of battle of forms litigations. Even there, the general rule was, the customer is required to sign the IBM standard agreement. However, if the customer insisted on the use of its own purchase order, it would be allowed, but IBM made sure it sent the last form, by sending the customer an order acknowledgement that contained a copy of its standard terms and stated the standard terms of IBM will govern the order.[469] In Information Records Division IBM usually accepted purchase orders from its customers without sending an acknowledgement form, but if the value of contracts was above 1,000 dollars, IBM insisted the customer sign its agreement. Another approach that IBM used in this department was printing its standard terms at the back of bills of lading, which the customer had to sign when accepting the order. This is another 'last-shot' approach. A similar procedure was adopted in the Office Products Department."

In conclusion, IBM was selling its products usually requiring a customer to sign its form contract or if not; it made sure it sent the last form in the potential battle ('last-shot'). Annually, the total number of contracts that was potentially exposed to the battle of the forms litigation was approximately 18,000, but during its Vice-President Grant G. Murray experience in the company, which is more than fifteen years, there was not a single instance that the customer commenced litigation.

"IBM annually purchased 227,000,000 dollars worth of goods and services. In concluding purchase contracts, it used two kinds of forms. When the value of contracts was substantial, IBM negotiated all sales terms and later signed a formal contract. In other purchases, IBM sent its purchase order that contained its standard terms.[470] It did not require a supplier to acknowledge the order, but some suppliers, around 20%, did so. This percentage represented a potential battle of the forms litigation, where IBM would be exposed to potential consequences of the 'last-shot' rule, sending the first form. Grant G. Murray explained, IBM consciously took this risk, as it never had a battle of the forms litigation. If dispute arose, it was on the interpretation of a clause but not on its incorporation into the contract. The other significant factor of taking the risk of the battle of the forms litigation was the monetary consideration. Ensuring a complete escape from the possibility of battle of the forms would substantially increase administrative costs, by hiring additional personnel, not just for IBM but also for its customers and suppliers. Therefore, it was cheaper for IBM to risk eventual litigation, which most likely would not occur, than to burden its expenses with hiring additional personnel that would handle the increased paperwork."

On the other hand, Thomas J. McCarthy a Corporate Counsel in E.I. du Pont de Nemours emphasized the issue of battle of the forms become commercially irrelevant in the era of electronic contracting, using the Electronic Data Interchange (EDI) system and employing electronic purchase orders, acknowledgements, invoices and alike, known as "transaction sets." The transaction sets include a number of data relating to the product, price, quantity, quality and others that are essential contractual elements but are usually free from standard terms. Though their inclusion is possible in the comment fields, merchants prefer "clean" transaction sets that can be handled easily and quickly.[471] Refusal to include boilerplate terms into transaction sets evidence the reality that has existed long before. Businesspersons do not consider boilerplate terms as part of their deal unless it reflects some custom or course of dealing between them. For many years it has been an open secret that standard forms go unread and would not have been understood by decent and reasonable parties, even if they had been read. No one reads the boilerplate terms unless trouble occurs.[472]

After many years of the existence of uncertain statutory regulation, practice made efforts to end the battle of forms developing different techniques. The IBM report evidences that forms are used for almost every transaction, whether buying or selling products, but disputes are rare. Probably other large corporations as well, in most cases make sure there will be no battle and in others, calculate and consciously take the risk of eventual litigation.

On the other hand, the rise of EDI transactions has almost eliminated the use of standard terms. However, it still did not completely take over traditional, paper transactions. In traditional transactions, practice developed another technique. To reduce cost and improve transaction efficiency, business has ceased to use order acknowledgement forms and thereby quit the battle of the forms even before it would start.[473] More importantly, when disputes arise, parties usually settle the issue on a business basis.[474]

It can be concluded; practice slowly eliminates the battle of forms, either by using the EDI system or stopping sending order acknowledgement forms. Contracts are executed on a voluntary basis and eventual disputes settled out of the courts. Litigations involving battle of the forms are generally rare. From this perspective, the issue is indeed commercially irrelevant. However, the present research shows, sometimes litigations do arise and then, the issue cannot be solved without deep understanding of the confusing statutory provisions and being familiar with court decisions. From this respect, the issue is indeed relevant. Therefore, the problem might be commercially irrelevant but it is legally significant.

In practice, disputes arise in two types of situations. First, before there has been any performance, there is a change of circumstances, such as a rise or fall in market price, and one of the parties seizes upon the discrepancies in the forms as an excuse for not performing. Second, after shipment of the goods by the seller and their receipt by the buyer, a dispute arises over some aspect of performance, and it becomes necessary to determine the contract terms that govern the dispute.[475] Therefore, the two main questions of battle of the forms litigations are: Is there a contract? If yes, what are its terms?

2. Contract formation under the CISG and the UCC

The CISG incorporates the 'mirror-image' rule in Art. 19(1) CISG as the principle rule for contract formation whereby contracts are concluded with an offer and acceptance that correspond in all aspects. If the acceptance contains additions, limitations or alterations, the communication is a new offer, a counter-offer. The CISG's rules on contract formation will transform nearly all acceptances whose terms deviate from those of the offer into a rejection and a counter-offer.[476]

However, Art. 19(2) CISG softens the strict compliance requirement allowing a communication that was intended to be an acceptance, to function as such, provided it contains only immaterial alterations. Which are material and which immaterial alterations depend on all the circumstances of the case but Art. 19(3) CISG gives a non-exhaustive list of changes that should be considered essential.

§ 2-207 UCC departs from the common law 'mirror-image' rule giving preference to the parties' intent. Under § 2-207(1) UCC, a communication that is intended as an acceptance will function as such despite containing additional or different terms. Only if the acceptance is made expressly conditional on the offeror's assent to terms additional to or different from those offered will cease to be an acceptance and amount to a counter-offer.

In comparison, if the objection is raised before there has been any performance; the two statutes will give different results. Under the CISG, there will be no binding contract due to the 'mirror-image' rule. Only exceptionally, provided the change is immaterial and the offeror does not object, the communication will function as an acceptance and there will be a binding contract. In contrast, under the UCC, even if the acceptance contains additional or different terms it will be valid for contract conclusion and in exceptional circumstance, when the acceptance is made expressly conditional on the offeror's assent, the acceptance will amount to a counter-offer and there will be no binding contract without an explicit assent of the offeror.

It can be observed, what is a rule in CISG is an exception in the UCC and vice versa. In conclusion, if the objection is raised before there has been any performance there will be more binding contracts under the UCC than under the CISG.

More often the objection is raised when parties performed some of their obligations under the contract they contemplated was validly concluded. If the objection is raised after performance, both CISG and UCC will lead to the same solution. Regardless whether the offeree's communication is interpreted as an acceptance (UCC) or a counter-offer (CISG), courts will hold there is a valid contract. Case law shows the discrepancy in forms is rarely raised before there has been any performance, and after performance the result under both statutes is the same; there is a valid and binding contract. Hence, the two at the first sight completely different provisions, lead to corresponding practical results.

In giving preference to the parties' intent over the strict and formal 'mirror-image' rule the UCC allows contracts to be formed in any manner sufficient to show agreement (§ 2-204(1) UCC). Contracts may be concluded by an offer an acceptance, conduct of the parties or orally and possibly later confirmed in writing (§ 2-207(1) UCC). In contrast, the CISG in Art. 19(1) contemplates only contracts by an offer and acceptance.

3. Determining the terms of the contract under the CISG and the UCC

Under the CISG, if the additional or different terms in the communication that is intended to be an acceptance are immaterial, the contract will be concluded on the terms of the offer with the modifications in the acceptance (Art. 19(2) CISG), basically on the offeree's terms, provided the offeror does not object. Hence, when the alterations are immaterial the 'last-shot' rule will govern in determining the terms of the contract.

However, due to the non-exhaustive list in Art. 19(3) CISG almost all alterations that appear among boilerplate clauses will amount to a material change. If the change is material, the offeree's communication is inevitably a counter-offer. As the CISG does not give any guidance how to go forward in determining the terms of the contract, it will depend on the judge handling the instant case.

It is generally held when the 'mirror-image' rule is applicable for contact formation consequently the 'last-shot' method gives the governing rule for determining its term. As Art. 19 CISG is based on the 'mirror-image' rule, and the 'last-shot' rule is already incorporated into Art. 19(2) CISG, it can be concluded, the terms of the contracts decided under the CISG should be determined with the application of the 'last-shot' rule. However, court rulings on the issue are considerably different.

Judges that understand Art. 19 CISG are aware that the 'last-shot' rule should be applied and some really do apply it. They reason, the offeror assented to the offeree's counter-offer by performing its obligations and making no objection to the new terms. Other judges, refuse to follow the "literal" meaning of Art. 19 CISG. Being familiar with the prevailing scholarly view and international documents, they rely the 'knock-out' rule in determining the terms of the contract, having troubles thereby in justifying their decisions, and reason differently, sometimes giving very thoughtful explanations. There is the other group of judges, not familiar with the CISG, at least not with its Art. 19, completely misapplying the provision.

Based on the analyzed sample of cases [477] the general tendency is to apply the 'knock-out' rule in determining the terms of the contract when the CISG is applicable.

Under the UCC, in practice, the battle of forms is solved in two ways.

a) Scenario 1: The acceptance was not made expressly conditioned on the offeror's assent and § 2-207 (2) UCC is applied for determining the terms of the contract

When the acceptance is not made expressly conditional on the offeror's assent, the contract is established by writings of the parties and the additional and/or different terms in the offeree's communication become proposals for contract modification (§ 2-207(1) UCC). Courts will apply § 2-207(2) UCC for determining the terms of the contract. The additional and/or different terms became part of the contract between merchants unless one of three situations occurs: the offer limits acceptance to the terms of the offer (§ 2-207(2a) UCC); the terms materially alter the offer (§ 2-207(2b) UCC); or the offeror timely notifies the offeree of objection to the additional terms (§ 2-207(2c) UCC).

Materially altering terms fall out (§ 2-207(2b) UCC) and the remaining common terms in both forms comprise the terms of the contract. The result is the same when the offeror objects to the new term (§ 2-207(2a) & (2c) UCC). Despite the offeror's silence or inaction, the contract remains valid and the conflicting terms fall out, if necessary, being replaced by default provisions of the UCC ('knock-out' rule). In contrast, alterations that are immaterial in the acceptance will remain a constitutive part of the contact. The terms of the contract will be those that were offered with the modifications in the acceptance ('last-shot' rule).

The wording of § 2-207(2) UCC causes considerable problems. It is surrounded with controversies around material-immaterial and additional-different riddles.

Because materiality is not specifically defined in the UCC, courts have some flexibility in interpreting the additional terms.[478] In this respect, Art. 19(3) CISG is more precise than § 2-207 (2b) UCC. Art. 19(3) CISG expressly lists clauses that should be considered material, while the UCC does not give any guidance in this respect. Official Comments 4 & 5 on § 2-207 UCC list [479] some very specific clauses as material alterations, but stay silent on many others that frequently occur in practice. Whether the terms are material or immaterial was subject to a considerable amount of litigation with divergent results.

The other puzzle of § 2-207(2) UCC is around additional and different terms. There is no agreement in theory and practice whether § 2-207(2) UCC relates only to additional or both additional and different or neither additional nor different terms. Here also Art. 19(2) CISG is more precise, talking about additional and different terms.

b) Scenario 2: The acceptance was made expressly conditional on the assent to additional or different terms by the offeror - the application of § 2-207(3) UCC

When the acceptance is made expressly conditional on the assent to additional or different terms, the communication will be interpreted as a counter-offer that has to be accepted expressly by the offeror. However, an explicit assent is rare. Parties usually go ahead and perform their obligations regardless the discrepancies in standard terms. If litigation occurs, court held that there is no contract established by writings of the parties but, because parties performed, they will apply § 2-207(3) UCC and consider that a contract waws concluded by conduct of the parties. § 2-207(3) UCC expressly stipulates the 'knock-out' rule for determining the terms of the contract; therefore, whether the term is additional or different it will fall out, being replaced by default provisions of the UCC.

The problem is how to determine whether the acceptance is made expressly conditional on the offeror's assent to the additional or different terms therein. Parties rarely if ever say "I make this order expressly conditional on your assent." Other wordings than this, courts can interpret basically how they want, based on their own understanding of the provision and feeling of justice. For example in the Dorton [480] case, the "subject to all of the terms and conditions" phrase was used, which is usually held as an "expressly conditional" language, but in Dorton it was not. Whether the acceptance is "expressly conditional" is today subject to narrow interpretation and in most cases, it will be held, the acceptance is not conditional. Though the expressly conditional language at first sight does not appear to be so important, the present research showed that it is the starting point for the majority of decisions. If the acceptance is made "expressly conditional", § 2-207(3) UCC is applied; if it is not made "expressly conditional", § 2-207(1) UCC (for contract formation) and § 2-207(2) UCC (for determining the terms of the contract) are applied.

The provision that is mostly litigated over is § 2-207(2) UCC due to additional-different, material-immaterial riddles. Consequently, in the battle of the forms litigations courts usually invoke the combination of § 2-207(1) UCC with § 2-207(2) UCC. Only if courts find no contract under § 2-207(1) UCC they will reach at § 2-207(3) UCC.

After comparing the rules of Art. 19 CISG and § 2-207 UCC in determining the terms of the contract, the conclusion is the following. The CISG lacks a provision that would establish the terms of the contract when the parties' forms are in battle. However, the 'last-shot' rule should have this task being the consequence of the 'mirror-image' rule. Nevertheless, in practice courts often reach after the 'knock-out' rule. On the other hand, the UCC stipulates the 'knock-out' rule for determining the terms of the contract, but it does so only for contracts that are concluded via the conduct of the parties. Other than that, there is no certainty. When forms are in battle courts apply both the combination of § 2-207(1) and § 2-207(2) UCC or § 2-207(3) UCC alone, whereby the combination of subsections 1 & 2 leads to both 'last-shot' and 'knock-out' rules. Therefore, in practice both the CISG and the UCC will equally lead to both methods in determining the terms of the contract. The only difference is, the 'knock-out' method should be the rule and the 'last-shot' the exception under the UCC and vice versa under the CISG. Yet in practice -- relying on the analyzed sample of the cases -- the tendency is the same: the application of the 'knock-out' rule in determining the terms of the contract.

4. Contracts concluded other than by offer and acceptance

In modern commercial transactions, contracts are concluded in different ways: by an offer and acceptance (by the exchange of writings), conduct of the parties or orally. § 2-207(1) UCC contemplates all three ways. In contrast, Art. 19 CISG only one, contracts concluded by an offer and acceptance.

Very often in practice, parties reach an oral agreement and later exchange their writings. Under the UCC, the terms of the contract will be those agreed to orally, the additional or different terms in parties' confirmations will amount to a proposal for contract modification and § 2-207(2) UCC will decide their fate. Letters of confirmations are one of the silent features of the CISG and there are divergent opinions, both theoretical and practical, how the issue should be solved.

Formation of contract by conduct of the parties under § 2-207(3) UCC will result in applying the 'knock-out' rule. Though the CISG does not contemplate the situation, courts will interpret the offeror's performance as an assent to additional or different, materially altering terms in the offeree's counter-offer, thereby applying the 'last-shot' rule. Therefore, under the CISG the parties' performance will lead to the 'last-shot' and under the UCC to the 'knock-out' rule in determining the terms of the contract.

It can be observed; the CISG gives more precise rules when contracts are concluded via offer and acceptance. The deviating acceptance is a counter-offer (save for the exception in Art. 19(2) CISG) the provision embraces both additional and different terms and gives an extensive list of material alterations. The UCC leaves open the discussion on additional and different terms, material and immaterial terms and struggles with the interpretation of the phrase "expressly conditional" which transforms the acceptance into a counter-offer.

What is wrong in the CISG is its starting point and underlying policy. The 'mirror-image' rule is inconsistent with the formalization of modern commercial transactions, when standard forms are used in everyday transactions and where the terms in the two forms never match. The 'mirror-image' rule results in no valid contract when standard forms are used. As the use of forms is a commercial reality, courts have troubles trying to make possible the co-existence of the 'mirror-image' rule and standard forms.

The UCC's policy is different. The policy behind § 2-207 UCC is that the parties should be able to enforce their agreement whenever it is possible without requiring either party to be bound by the other's materially altering term. In achieving this aim, the UCC gives effect to the parties' intent and abandons the common law 'mirror-image' rule and its accompanying 'last-shot' rule. At least it was intended to do so.

Having as staring points the two completely different provisions that give approximate practical results, the question that emerges is: is there a uniform solution to the issue of battle of the forms despite all kinds of collisions between the parties' standard terms that might be incorporated into different standard forms?

5. Is there a uniform solution for the issue of battle of the forms?

The issue of battle of the forms constitutes a gap in the scope of the CISG. In contrast, the UCC intended to deal expressly with the issue, but how and where, is difficult to reveal even after detailed analyses of the drafters' intent. Art. 19 CISG and § 2-207 UCC are completely different but again similar as neither gives certainty in commercial transactions when standard forms are involved.

In contract formation as well as in determining the terms of the contract, one rule should be established for all possible practical situations. § 2-207 UCC attempted to deal with all kinds of practical scenarios and what it achieved is a chaos and divergent interpretation of the provision.

Contract formation should be clearly divorced from determining the terms of the contract, preferably incorporated into separate provision (like it is done in the NUCC).[481] Formally, it might be acknowledged that contracts are concluded in different manners (as § 2-207 NUCC does),[482] but it is not necessary. Practice shows, in a great majority of cases a dispute arose only after the parties performed, over some aspect of the performance, when the issue is not any more whether there is a contract but only what are its terms. However, if the provision is invited to deal with contract formation for all situations, not just the battle of the forms, the list of different ways is desirable. The rule of a clear and unambiguous offer followed by an unconditional acceptance should be kept for contract formation in general. The terms that are negotiated have to match in all aspects (the 'mirror-image' rule) otherwise there is no meeting of minds and probably intention for contract conclusion. However, for formation of contract via standard forms, special rules should be applied, distinct from general rules on contract formation. Terms that are negotiated between the parties would continue to be governed by general contract formation rules, only the standard terms would get special treatment (like in the UPICC and PECL). When contracts are concluded with the use of standard terms an exception from the 'mirror-image' rule should be allowed. Namely, to acknowledge formally, there is a valid contract despite differences in the parties' standard terms.

The other important rule for contract formation with standard terms is to settle the issue of enforceability of standard terms that are in general conditions. Due to a great majority of different practical settings, it is difficult to give a single model. However, the PECL could serve as a model. According to the PECL, standard terms are enforceable only if the party who intends to rely on them took reasonable steps to alert the other party to their inclusion and make available their content before or at the latest at the time of contract conclusion. A simple referral to the standard terms is not sufficient.[483] The phrase "reasonable steps" from the analysis given in the thesis generally means, there should be a reference to general conditions and the standard terms therein, in the main body of the contract and the entire text has to be available to the other party. Making available means sending the whole text of the general conditions -- the other party is not obliged to inquire -- preferably in a language that the other party is familiar with. An implied incorporation is also possible due to a trade usages or an established course of dealing between the parties.

When contracts are concluded using standard forms or general conditions, the contract will be comprised of a set of provisions that parties did not mention before, during negotiations. Some will most likely match but some will considerably differ. As standard provisions are never read, it would be unfair to impose on one party a whole set of provisions while the other would be free from any additional term and conclude the contract solely on the terms that are it its favor (standard terms) or that it agreed at (negotiated terms), all based only on the fact, it fired the last shot in the battle of the forms. Hence, in statutory regulation, for the problem of conflicting standard terms, an exception from the 'mirror-image' and 'last-shot' rule should be stipulated: the application of the 'knock-out' rule. When neither party's standard terms become part of the contract, the end result might not correspond to what the party contemplated,[484] but at least it will not serve the advantage of either party or, in other words, it will be equally unfair (or fair) for both parties. Classifying the conflicting terms as additional or different, material or immaterial is unnecessary. It only causes confusion. All terms that differ in any sense should fall out. If the suggested approach is adopted, the issue of unfair contract clauses is also solved. As whether fair or unfair, all conflicting clauses will fall out being replaced by "neutral" statutory provisions.

On the other hand, if practice comes across a diligent merchant, who reads all the terms in the other parties form, as a reward it should have the opportunity to object the terms, in a timely manner, that is, before either party performed any of its obligations. In case the initial offeror objects, there will be no contract, but also no harm done, and parties, if they wish, can continue the negotiations until reaching an acceptable agreement for both sides.

The statutory solution should be short and simple. Though in reality contract are concluded in many different ways, a separate regulation for all is undesirable. § 2-207 UCC is an example. It attempts to contemplate as many practical scenarios as possible but what it achieved is only chaos and uncertainty. On the other hand, when contracts are concluded orally or via conduct of the parties the issue is not any more whether there is a contract, rather what are its terms.

Therefore, a uniform solution is possible and, moreover the provision(s) should be clear and simple. However, the present state of law goes in a different direction.

In 2003, § 2-207 UCC has been revised at first sight giving a "new" solution but in reality leaving untouched the material-immaterial, additional-different riddle and incorporating a new provision that is supposed to give effect to the parties' intent but in practice might cause problems.[485] Nevertheless, drafters often cannot anticipate how the provision will work in practice. As the preset § 2-207 UCC was revolutionary and expected to give good practical results, [486] the change in the NUCC might prove satisfactory.

And what happens with the CISG? The change of Art. 19 would require a burdensome legislative procedure followed by international consensus, where after reaching a compromise a different result is not guaranteed.[487] In the light of this fact, the present confusion can be aided by using the UPICC and PECL as gap filling instruments under Art. 7(2) CISG.

According to Art. 7(2) CISG, matters that are governed but not expressly settled in the CISG should be settled in accordance with general principles on which it based. The UPICC and PECL are instruments that contain general rules of contracts [488] and they might be applied when contracts are governed by "general principles of law.[489] "Further, in their preparation a wide range of legal materials from all over the world had been drawn up, and no single legal system was a starting point. Moreover, the CISG had substantial influence on the rules relating to formation of contracts that resulted in very similar provisions in all three documents (CISG, UPICC, PECL) and they are even called the "troika."[490] From the perspective of UPICC and PECL, their application is allowed, as in any event they can be used as gap filling instruments.[491]

The use of these instruments as gap fillers is especially important, as both the UPICC and the PECL take over the CISG's rules on contract formation, basically incorporating the 'mirror-image' rule and its accompanying 'last-shot' method.[492] However, they contain an explicit battle of the forms provision that stipulates the 'knock-out' rule in determining the terms of the contract, thereby departing from the general rules on contract formation.[493] Courts applying the CISG could rule that the issue is a gap in the regulatory scheme of the CISG, as Art. 19 CISG deals with non-confirming acceptance in general, and not with non-confirming standard terms. By concluding that there is a gap, courts could reach at either UPICC or PECL as instruments that contain general principles of law and, based on Art. 7(2) CISG, apply the 'knock-out' rule in determining the terms of the contract. For unknown reasons, this rarely, if ever happens in practice.

The two instruments also give an opportunity for a party that does not intend to be bound by such a contract, to object and thereby prevent the formation of the contract, provided the objection is explicit and given before any performance. The objection is explicit if it is placed outside standard clauses. Therefore parties could derogate form the 'knock-out' rule in determining the terms of the contract.

Besides containing explicit provisions for conflicting forms the two instruments contemplate other problems related to contracts with standard terms as well.[494]

The UPICC and PECL should be at least used as interpretative instruments for Art. 19 CISG based on Art. 7(1) CISG, according to which, in the interpretation and application of the CISG, regard should be given to its international character and its uniform application. The use of the UPICC and PECL would achieve both aims. These are instruments that were prepared consulting many different legal systems and are therefore international and would without a doubt result in consistent solutions under the CISG.

Whether as gap filling or interpretative instruments, by using the UPICC and PECL uniformity in the application of the CISG in case of battle of the forms would be achieved. However, it has to be observed, the UPICC has greater potentials in contributing to uniform solutions as it represents general principles of contract law, while the PECL contains general rules of contract law of the European Union, therefore, its application is in principle territorially limited to EU states. However, as both instruments contain very similar provisions on the battle of the forms, the application of either will bring identical solutions. Therefore, whether one or the other is applied, the result would be still uniformity. The potentials of using case law aiding uniform solutions in the battle field of the forms under the CISG, is insufficient, as the present research showed, due to limited availability of decisions rendered in different Contracting States.

In conclusion, the present state of battle of the forms is: chaos. The CISG left the issue unresolved lacking an explicit provision to that effect while the UCC gave a broad and too detailed provision that is subject to divergent interpretation. Putting aside the details and looking only at overall results, Art. 19 CISG and § 2-207 UCC that are at first site completely different provisions, produce approximate practical results. In most of the cases, if parties performed under the contract they contemplated is validly concluded, courts held there is a valid contract despite discrepancies in the parties' standard terms, and the terms of the contract are determined by the 'knock-out' rule.

Even if one day practice completely eliminates the use of standard terms and thereby ends the battle of the forms, until then, there is need for a workable statutory solution or in the lack of it, for a uniform practical application of the existing provisions.


BIBLIOGRAPHY

AUTHORITIES

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FOOTNOTES

* This thesis has been completed at the Central European University, Budapest, Hungary. It has been submitted in November 2006, which is also the time of its last revision. I would like to thank my supervisor, Professor Tibor Várady for his valuable comments and suggestions; however, all views expressed in the thesis and all mistakes therein are personal. Comments are welcomed at andrea13f@gmail.com.

1. The English version of the CISG see <http://cisgw3.law.pace.edu/cisg/text/treaty.html> Last visited: November 2006

2. Prior UNCITRAL, the work of the sales law unification has been taken up by another international organization, the UNIDROIT. UNIDROIT is an independent intergovernmental organization with its seat in Rome. Its purpose is to study needs and methods for modernizing, harmonizing and co-coordinating private and in particular commercial law as between States and groups of States (See <http://www.unidroit.org/english/presentation/main.htm>).

UNIDROIT started its unification work in the early 1930's but due to the interruptions of the I. and the II. World War, the two instruments, ULF and ULIS have been ready and adopted only in 1964 they did not enjoy wider acceptance and the problem of a unified sales law remained unsettled. UNCITRAL started its work in 1968 and studied the said documents to find out which reforms would be necessary for the wider adoption, by countries of different legal, economical and social system. The work of UNCTRAL resulted in the CISG that is today widely accepted in different parts of the world.

The Vienna based international organization; the UNCITRAL was established by the UN General Assembly in 1966 by giving it the task to eliminate barriers in the flow of international trade crated by disparities in national laws and give the United Nations more active role in reducing or removing these obstacles. It is composed of sixty Member States elected by the UN General Assembly. Membership is structured so as to be representative of the world's various geographic regions and its principal economic and legal systems. See <http://www.uncitral.org/uncitral/en/about/origin.html>

3. Eörsi, Gyula: Problems of Unifying Law on the Formation of Contracts for the International Sale of Goods, 27 American Journal of Comparative Law, 1979 (Hereinafter: Eörsi)

4. Art. 1(1) CISG. The main rule is in the first sentence, namely that the CISG applied when the parties have their place of business in states that adopted the CISG because contracting states had an opportunity to place a reservation on subparagraph 1 (b). Pursuant to Article 95, China (PRC), Singapore, St.Vincent & Grenadines, the United States, the Czech Republic and Slovakia declared that they would not be bound by Art. 1(1b) CISG. See <http://cisgw3.law.pace.edu/cisg/countries/cntries.html> Last visited: November 2006

5. See the list of Contracting States at <http://cisgw3.law.pace.edu/cisg/countries/cntries.html> Last visited: November 2006

6. See the current status of CISG and trends in its further development at <http://cisgw3.law.pace.edu/cisg/cisgintro.html#current> Last visited: November 2006

7. The use of Art. 19 for battle of the forms is not unidputed among experts and even case law. For the discussion see part I.1. (Is the issue of battle of the forms governed by the CISG?)

8. See UPICC 2004 English version at <http://www.unidroit.org/english/principles/contracts/principles2004/blackletter2004.pdf#search=%22UNIDROIT%20Principles%22> Last visited: November 2006

9. See 1999 PECL English version at <http://frontpage.cbs.dk/law/commission_on_european_contract_law/Skabelon/pecl_engelsk.htm> Last visited: November 2006

10. UPICC was prepared by UNIDROIT. PECL was drafted by the Commission on European Contract Law, as part of the civil law unification in the EU. The UPICC and PECL show great similarities, their terminology and structure are similar, and arround two thirds of the provisions of the first edition of the UPICC are identical with those of the PECL (Bonell, in Bianca, C.M.;Bonell, M.J., Commentary on the International Sales Law: the 1980 Vienna Sales Convention, Giuffré, Milan,1987 (Hereinafter: Bianca/Bonell) p. 75) They have been inspired by the CISG and some national laws, but also contain some ideas, solutions that have not been materialized in the law of any country. The only significant difference is in the territorial scope of their application, as the use of the PECL it limited to the EU countries (Art. 1:101 (1) PECL).

11. Bonell, in Bianca/Bonell p. 75

12. See part I.1. (Is the issue of battle of the forms governed by the CISG?)

13. Art. 1:101 (1) of PECL and the Preamble of UPICC

14. Art. 1:101 (3a) of PECL and the Preamble of UPICC

15. Lando Ole, CISG and Its Followers: A Proposal to Adopt Some International Principles of Contract Law, 53 American Journal of Comparative Law (Spring 2005) (Hereinafter: Lando), p. 382

16. As far as the possibility of using the UPICC as an interpretative instrument is concerned, practice shows that judges and arbitrators refer rarely to Art. 7(2) CISG. See Bonell, M.J., UNIDROIT Principles 2004 - The new edition of the Principles of International Commercial Contracts adopted by the International Institute for the Unification of Private Law, Uniform Law Review, 2004 (Hereinafter: Bonell) p. 14

17. The case law of Contracting Sates to the CISG is available in a database administered by UNCITRAL, the Case Law on UNCITRAL Texts (CLOUT) at <http://www.uncitral.org/uncitral/en/case_law.html> and at the CISG database administered by the Pace Law School, Institute of International Commercial Law at <http://www.cisg.law.pace.edu> Last visited: November 2006

18. Sclechtriem, Peter: Commentary on the UN Convetion on the International Sale of Goods (CISG), Oxford, 1998(Hereinafter: Schlechtriem 1998), p. 62

19. The terms "case law" have different meaning to jurists in different legal systems. Common lawyers consider their 'judge-made law' to be an extremely important source of law while civilian jurist, educated to believe that 'real' law can only be made by a parliament, would reject the concept that judges are empowered to 'make' law at all. Lookofsky, Joseph: Digesting CISG Case Law-How Much Regard Should We Have?, 8 Vindobona Journal of International Commercial Law and Arbitration (2004), (Hereinfater: Lookofsky: Case Law) p. 184

20. These are the following decisions: Tribunale civile di Cuneo, 31 January 1996, n. 45/96 (Sport D'Hiver di Genevieve Culet c. Ets. Louys et Fils), in UNILEX 1996 and Cour d'Appel de Grenoble, Ch. com., 23 October 1996 (Scea Gaec Des Beauches Bernard Bruno c. Societé teso Ten Elsen GMBh & CokG), unpublished. See Bonell, Michael-Joachim; Liguori, Fabio: The UN Convention on the International Sale of Goods: A Critical Analysis of Current International Case Law-1997 (Part 1), Uniform Law Review, 1997 (Hereinafter: Bonell/Liguori)

21. NCCUSL was established in 1892 to promote uniformity in state laws. It is a non-profit unincorporated association, comprised of state Commissioners from each (law professors, judges and lawyers) State where each State has at least three Commissioners, which are being appointed by their state official, usually the Governor. See <http://www.nccusl.org/Update/> Last visited November 2006

ALI was organized in 1923 for the purpose of preparing the Restatement of the common law. Its aim is law reform, clarification and simplification of the common law and it drafts, it approves and publishes various model laws and restatement of laws. Its members are judges, lawyers and law teachers form USA and abroad who demonstrate significant interest to reform the existing law. See <http://www.ali.org/> Last visited: November 2006

22. The only US State that did not implement Art. 2 UCC is Louisiana having civil law system in the filed of commercial law.

23. Though the text as it is adopted by ALI and NCCUSL shows no substantial differences in all the 49 states of US, for the purposes of thesis the focus will be given to only one version, the UCC that is in force in the state of New York. The State of New York adopted the entire text of Art. 2 UCC without any amendments and it is available on the web site of Cornell Law School at <http://www.law.cornell.edu/ucc/ucc.table.html> Last visited: November 2006

24. Maggs, Gregory E.: The Waning Importance of revision to U.C.C. Article 2, 78 Notre Dame L. Rev. 595, 2003 (Hereinfater: Maggs)

25. The work on the UCC began in 1945. During the drafting process, the proposals have to go through various expert bodies until they were submitted for the final approval to ALI and NCCUSL. The first text has been completed in 1951 and the Official text has been published in 1952. Pennsylvania was the only State to adopt this version. The New York State Law Revision Commission studies the version from 1953-56 and issued a lengthy report recommending New York not to adopt the 1952 Official Text of the UCC. The report was influential and it resulted in the Code's revision and publishing a new Official Text in 1958, thereafter it was again subject to revision in 1962, which version have been adopted by every State of the USA except Louisiana. See Epstein, David G,; Martin, James A.; Henning, William H.; Nickles, Steve H.: Basic Uniform Commercial Code, West Publishing Co, St. Paul, Minn,1998 (Hereinafter: Epstein at all) p.1-3

26. NCCUSL approved the amendments in August 5, 2002, which ALI approved in spring 2003. See Summary of 2003 amendments at <http://www.nccusl.org/Update/uniformact_summaries/uniformacts-s-ucc22003.asp> Last visited: November 2006

27. The initially drafters sought to update nearly all aspects of Art. 2. However, NCCUSL did not want to destroy the present uniformity of Art. 2 by advancing amendments that some jurisdictions might reject due to a potential opposition by consumer and business groups. See Maggs

28. The states are: Kansas (Introduced as HB2454/HB2455 in 2005-06, House Judiciary) and Oklahoma (Introduced as HB3129/HB3084 in 2005-06, House Judiciary/Died in Conference) See <http://www.nccusl.org/Update/ActSearchResults.aspx> Last visited: November 2006

29. Official Comments on every section of the UCC have been prepared by ALI and NCCUSL in order to reflect the drafters' intention and clarify how the provision should be applied in practice.

30. Restatement (Second) of the Law of Contracts was approved and promulgated by ALI in May 2003. It is not a binding law but is intended to help in the interpretation of the UCC and advocate its uniform application. It is implicit in the concept of restatements that the work should be kept current by periodic reexamination and revision. Restatement (Second) of Contracts has been introduced in 1981 to reflect the changes and developments in the field of contract law. See <http://www.ali.org/> Last visited: November 2006

31. Poel v. Brunswick-Balke-Collender Co 216 N.Y. 310, 110 N.E. 619 (1915)

32. Murray, John E.: The Chaos of the "Battle of the Forms": Solutions, 39 Vand. L. Rev. 1307 (1986) (Hereinafter: Murray: Solutions) p.1316

33. Calamari, John D.; Perillo, Joseph M.: The Law of Contracts, West Group, St. Paul, Minn (1998) (Hereinafter: Calamari/Perillo) p.25

34. 8 Williston on Contracts § 18:11 (4th ed.), (Hereinafter: Williston)

35. Vergne, François: The "Battle of the Forms" under the 1980 United Nations Convention on Contracts for the International Sale of Goods, American Journal of Comparative Law, 1985 (Hereinafter: Vergne)

36. van Alstine, Michael P.: Consensus, Dissensus, and Contractual Obligation Through the Prism of Uniform International Sales Law, 37 Virginia Journal of International Law 1 (Fall 1996) (Hereinafter: van Alstine)

37. White, James J. Summers, Robert: Uniform Commercial Code § 1-3 (4th ed.) (Hereinafter: White/Summers), see also Summers, Robert S.; Hillman, Robert A.: Contract and Related Obligation: Theory, Doctrine and Practice, West Publishing, St. Paul, Minn, 1992 (Hereinafter: Summers/Hillman) p.498

38. Standard contracts may be drafted by individual enterprises, but also by trade associations (like GAFTA-Grain and Feed Trade Association, London) or international organizations (e.g. the ICC).

39. General conditions of sale and standard contracts, incoterms and other trade terms: Promotion of wider use of existing general conditions of sale and standard contracts: the report of the Secretary-General, A/CN.9/18 (1970) (Hereinafter: Secretary-General: standard contracts)

40. Ibidem

41. See Art. 2:209(3) of PECL, similarly Art. 2.1.19 (2) UPICC Distinction should be drawn between general conditions and standard trade terms (e.g. INCOTERMS 2000). The latter refer to only certain aspects of the contract, e.g. place of delivery. The use of standard trade terms is generally accepted in international trade and they usually function as international usages. The overlapping is not excluded; general conditions can contain standard trade terms.

42. Slawson, W.: Standard Form Contracts and Democratic Control of Law-making Power, 84 Harv.L.Rev. 529 (1971) in Summers/Hillman p.596.

43. Epstein at all p. 232-233

44. Murray: Solutions p. 1316

45. For ways of collision see White/Summers, Schlechtriem, Peter: Battle of the Forms in International Contract Law, Evaluation of approaches in German law, UNIDROIT Principles, European Principles, CISG; UCC approaches under consideration, "Kollidierende Geschäftsbedingungen im internationalen Vertragsrecht", in: Karl-Heinz Thume ed., Festschrift für Rolf Herber zum 70. Geburtstag, Newied: Luchterhand (1999) 36-49, with an updated reference to a January 9, 2002 ruling by the Supreme Court of Germany added thereto (Hereinafter: Schlechtriem: Battle of Forms)

46. Schlechtriem: Battle of the Froms

47. von Alstine calls this state of affairs a "dissensus" between the parties. A defining feature of the dissensus is that if affects only some aspects of the parties relationship, it is only partial. See van Alstine

48. Spanogle, John A; Winship, Peter: International Sales Law, St. Paul, Minn, 2000 (Hereinafter: Spanogle/Winship) p. 134

49. Electronic Data Interchange (EDI) is the computer-to-computer exchange of structured information, by agreed message standards, from one computer application to another by electronic means based on certain message standards and typically used in the automated purchase of goods and services. See for more Wikipedia at http://en.wikipedia.org/wiki/Electronic_Data_Interchang

50. "Shrink-wrap" contracts are concluded when goods are ordered and delivered via Internet. The seller with delivering the product delivers its standard terms, whereby the contract is concluded when the buyer accepts the goods and fails to send them back within the stated period laid down in the seller's standard terms.

51. Recourse to a national law is justified differently. For example Vergne is of the opinion that when contract are concluded by performance the CISG alone does not offer any solution as to the terms of the contract. Or if it does, there are more options." To escape such a labyrinth, a court may have no alternative other than to refer to a domestic solution." Vergne. Other scholars consider the history of CISG as reason for the application of domestic law. See Hellner, Jan: The Vienna Convention and Standard Form Contracts, in Petar Sarcevic & Paul Volken eds, International Sale of Goods: Dubrovnik Lectures, Oceana, 1986 (Hereinafter: Hellner)

52. Winship, Commentary on Professor Kastley's Rethorical Analysis in Spanogle/Winship p. 131

53. Art. 4 (a) CISG should only refer to the capacity of parties, the exchange of their consents, (municipal) regulations of a police character or regulations for the protection of persons . Ibidem

54. Schlechtriem, Peter: Uniform Sales Law, Vienna,1986 (Cited as: Schlechtriem 1986) p. 57

55. Amongst followers of this opinion are Luis Diez-Picazo and Bernard Audit. See del Pilar Perales Viscasillas, Maria: "Battle of Forms" Under the1980 United Nations Convention for the International Sale of Goods: A Comparison with section 2-207 UCC and UNIDROIT Principles,10 Pace International Law Review, 1998 (Hereinafter: del Pilar Perales Viscasillas: Battle of the Forms)

56. The followers of this solution explain, the CISG does not give an acceptable solution (if at all) when despite the divergent terms parties performed, as generally, it does not accept contract formed by performance. Hence, its rules are not suitable for determining the terms of the contract. See Ibidem

57. For example del Pilar Perales Viscasillas: Battle of he Forms; Schmidt-Kessel, Martin: On the Treatment of General Terms and Conditions of Business Under the UN Convention on Contracts for the International Sale of Goods (Hereinafter: Schmidt-Kessel)

58. There are two points of view supporting the application of Art. 7. One says it is a gap because the delegates rejected the "Belgian proposal" at the Vienna Conference, which was in favor of the 'knock-out' rule; hence the gap should be filled in by the application of the same rule. See Hellner. According to the other opinion in a situation where conflicting forms are involved indicating assent by conduct (pursuant to Art. 18 (3) CISG) is not a sufficient to show acceptance. See for example Vergne

59. van Alstine

60. "Traditional contract theory, in its purest form, would seem to suggest that contract and partial consensus are mutually exclusive propositions." Ibidem

61. The difference between simple replies and replies that purport to be acceptances was pointed onto during the drafting process, regarding Art. 19 (1) CISG. The text of (than Art. 13(1)) prepared by the Working Group read: "A replay to an offer which contains additions, limitations or other modification is a rejection of the offer and constitutes a counter offer."( Report of the Secretary-General: Commentary on the Draft Convention on the Formation of Contracts for the International Sale of Goods, UN. Doc. A/CN.9/144 (Hereinafter: Secretariat's Commentary on the Draft Convention). Some delegates have found the wording inaccurate and potentially dangerous for contract formation. It have been suggested that the words "reply to an offer" should be replaced by "a purported acceptance" modeled after para. 2 or simply to an acceptance (the opinion of delegates form the US and the Netherlands) (Report of the Secretary-General: analytical compilations of comments by governments and international organizations on the Draft Convention on the Formation of Contracts for the International Sale of Goods as adopted by the working group on the International Sale of Goods and on a draft a uniform law for the unification of certain rules relating to validity of contracts for the international sale of goods prepared by the International Institute for the Unification of International Private Law, UN. Doc. A/CN.9/146 Add. 1-4 (Hereinafter: Comments of Governments). The present wording may cause confusion and suggests that if the reply makes only inquiries it is a rejection of the offer. This point is especially relevant in the light of now Art. 17 CISG, according to which the offer, even if irrevocable, is terminated when the rejection reaches to offeror (Secretariat's Commentary on the Draft Convention). Therefore, there should be a clear border between replies that only make inquiries for further negotiation and replies that are intended to be acceptances. It does not refer to situations where the offeree just explores the offeror willingness to accept additional or different terms, leaving open the possibility to accept or reject the offer at a later point (delegate of Sweden) (Comments of Governments).

62. Hungary, Metropolitan Court (Vago v. Monimpex) June 17, 1997 (A Canadian buyer concluded a distribution contract with a Hungarian seller. The contract was to expire on 31 December 1991. After the contract's expiry, the parties discussed and corresponded about extending the distribution contract into 1992. However, when the seller failed to deliver any goods in 1992 the buyer sued. The Court held, that there was, pursuant to Article 19(3) CISG, no clear agreement between the parties and therefore no distribution contract for 1992. The court held that the communication was not purported to be an acceptance but just explored future possibilities regarding the extension of the contract.)

63. Sono in Enderlein, Fritz; Maskow, Dietrich: International Sales Law, New York, London, Rome (Hereinafter: Enderlein/Maskow) p. 96

64. Switzerland, Bezirksgericht [District Court] St. Gallen July 3, 1997 (A Dutch seller and a Swiss buyer entered into an agreement for goods to be manufactured by the buyer with raw material delivered by the seller. After using up 10 percent of the raw material, the buyer wished to put an end on the cooperation, but the parties could not agree on the price of the textiles. Whether there was a valid agreement for the termination of the contract, the court examined if the intention to be bound, as one of the constitutive elements of the offer under art. 14 CISG is present, by taking into account statements and conduct of the parties (Art. 8(2) and (3) CISG). It held that, absent any relevant circumstance or practice between the parties at the time the contract was concluded, the intention to be bound had to be interpreted according to the subsequent conduct of the parties after the conclusion of the contract).

65. Lookofsky, Joseph: The 1980 United Nations Convention on the International Sale of Goods, Article 19 Mirror Image and Battle of Forms in Bernstein, Lookofsky: Understanding the CISG in Europe, 2d ed. (2003) (hereinafter: Bernstein/Lookosky) and Lookofsky, Joseph: Understanding the CISG in the USA, 2. ed, Kluwer Law International, 2004 (Hereinafter: Lookofsky). For a different opinion see Comments on the Draft Convention. Different terms of the offer in most cases will not alter the offer materially. If for example the offeror states that if has 50 tractors for sale available for a certain price and the offeree replays in his telegram "ship immediately", it will not amount to a material change.

66. Honnold, John O.: Uniform Law for International Sales under the 1980 United Nations Convention, Kluwer Law International, 1982 (Hereinafter: Honnold) p. 193. Similarly, Gabriel p.283 ("Article 19(3)'s list of material alterations includes those elements most typically found in sale of goods contracts. Thus, almost any alteration is material")

67. Lookofsky p. 55

68. van Alstine p. 34, Sclechtriem 1998; See also Gabriel, Henry D.: A Primer on the United Nations Convention on the International Sale of Goods: From the Perspective of the Uniform Commercial Code, 7 Indiana International & Comparative Law Review, 1997 (Hereinafter: Gabriel) p.284 ("The CISG's theory is that most of the terms and conditions on the backs of the forms are important; therefore, no contract exists unless both parties agree to the same terms.")

69. For example if the parties practice or a trade usage implies for the disputes to be resolved by arbitration. In that situation, even though Art. 19(3) CISG expressly state that the settlement of disputes is considered to be a material modification; in the case at hand it will be considered as an immaterial change. Honnold p. 169

70. Farnsworth, Allan E.:Formation of Contract, International Sales: The United Nations Convention on Contracts for the International Sale of Goods, Matthew Bender (1984) Galston & Smith ed. (Hereinafter: Farnsworth)

71. Bianca/Bonell/Farnsworth: Commentary on the International Sales Law, Milan, 1987 (Hereinafter: Bianca/Bonell/Farnsworth)

72. Schlechtriem 1998 p. 141.

73. For the argumentation see: UNCITRAL: Formation Draft (Art. 13 of the Formation Draft become Art. 17 of Draft Convention on Contracts for the International Sale of Goods.)

74. Report of the Secretary-General: Commentary on the Draft Convention on Contracts for the International Sale of Goods, U.N.Doc. A/CONF.97/5, (Hereinafter: Comments on the Draft Convention)

75. Ibidem

76. Eörsi in Enderlein/Maskow p. 99

77. Eörsi in Enderlein/Maskow p. 98

78. Ibidem

79. Schlechtriem 1998 p.140

80. France, Cour d'appel [Appellate Court] Paris April 22, 1992

81. Germany, Oberlandesgericht [Appellate Court] Naumburg April 27, 1999 (A German buyer and a Danish seller concluded a contract for the sale of a car. Pursuant to the offer of the buyer, the seller was to deliver the car within March 1997. The seller sent the buyer a confirmation of order in which April 1997 was the time of delivery and reserved the right to change the period of delivery. The buyer signed this confirmation and sent it back to the seller without objecting to the discrepancy. The Court held that the buyer's offer was effective (Art. 14(1) CISG). With respect to the seller's modified acceptance, the Court held that a reply to an offer, which purports to be an acceptance but contains different terms, which alter the terms of the offer, does not amount to acceptance, but constitutes a counter-offer (Art. 19(1) CISG). However, since the buyer had not objected to the modifications, which in the view of the Court did not materially alter the terms of the offer, the contract had been validly concluded on the terms of the modified acceptance (Art. 19(2) CISG). The seller was therefore obliged to deliver the car within a reasonable time after the conclusion of the contract (Art. 33 (c) CISG)).

82. China CIETAC Arbitration Proceeding (Steel products case) April 1, 1993 (A Chinese seller and an US buyer concluded a contract for the sale of steel products. In view of the seller's impossibility to deliver a substantial part of the goods, both parties agreed to enter into further negotiations in order to terminate the contract. The seller took the first step and declared himself willing to pay the penalty provided for late delivery in the contract, on the condition the buyer would discharge him from any further contractual obligation; the buyer replied it would accept this proposal provided that the seller would also bear the insurance expenses. Seller then sent a fax to the buyer whereby it (1) expressly accepted the buyer's offer and (2) asked the latter to draft a formal termination agreement. However, before the formal termination agreement has been drawn, the proceeding has been commenced. The arbitral tribunal found that the fax sent by the seller amounted to an acceptance of the offer made by the buyer (Art. 19 (2) CISG) rather than a counter-offer. Hence, the parties concluded a valid termination agreement).

83. Hungary, Metropolitan Court (Pratt & Whitney v. Malev) January 10, 1992 (Subsequent to advanced negotiation the US seller made to a Hungarian buyer two simultaneous and alternative offers though without fixing the price for all of the engines offered. According to the terms of the proposals the buyer was enabled to choose among different enumerated aircraft engines and relative quantity. Later on the buyer informed the seller that he would accept in conformity with the above-mentioned conditions. While the seller considered the contract to be concluded, according to the buyer this 'did not seem likely'. The court held, there is a valid contract, as a letter of acceptance was a valid acceptance, despite containing a provision that the letter be treated confidentially until the parties made a joint announcement regarding the purchase of jet engines. The plaintiff's offer had a paragraph whereby the defendant agreed to allow the plaintiff to publish a press release announcing defendant's choice of engine. The court found that a mere request to treat the letter confidential added by the buyer did not amount to a material modification was therefore to be considered as part of the agreement in accordance with Art. 19(2) CISG).

Hence, the court distinguished between the insertion of a material, additional term and "a simple request" for a material modification. DiMatteo, Larry A.; Dhooge, Lucien; Greene, Stephanie; Maurer, Virginia; Pagnattaro, Marisa: The Interpretive Turn in International Sales Law: An Analysis of Fifteen Years of CISG Jurisprudence, 34 Northwestern Journal of International Law and Business (Winter 2004) (Hereinafter: DiMatteo at all)

84. Germany, Landgericht [District Court] Baden-Baden August 14, 1991

85. DiMatteo at all

86. Austria, Oberster Gerichtshof [Supreme Court] March 20, 1997 (The dispute arose between an Austrian buyer and Russian seller, who negotiated for supply of chemical products but could not reach a final agreement on the quality. Finally, the seller sent an offer indicating the quantity (with possible variations), price and quality of the goods. The buyer replied but included a broader variation of the quantity. In the analyze the court had to decide whether the terms of the offer had been materially altered by the buyer's acceptance, considering that the buyer's first reply indicated a possible variation in the goods' quantity).

87. Karollus, UN-Kaufrecht, 1992 Springer, Vienna, Bydlinski in Doralt (ed.), Das UNCITRAL-Kaufrecht im Vergleich zum österreichischen Recht,1985 Manz, Vienna in Posch, Willibald, Petz Thomas: Austrian Cases on the UN Convention on Contracts for the International Sale of Goods, 6 Vindobona Journal of International Commercial Law and Arbitration, 2002 (Hereinafter: Posch/Petz) p. 12; DiMatteo at all

88. Ibidem. On the other hand, Prof. Schlechtriem notes there is disagreement among commentators whether the rule contained in Art. 19 (3) CISG is binding or just contains rules of evidence. See Schlechtriem: Battle of the Forms

89. DiMatteo at all

90. Germany, District Court Baden-Baden August 14, 1991 (The dispute arose between an Italian seller and a German buyer who conclude a sales contract of a certain amount of tiles. The seller agreed to the buyer's offer in writing but referred to its standard terms, which provided 'Notice of defects are valid only if made within 30 days after the date of the invoice'. Alleging non-conformity of the sent goods, the buyer refused to pay and the seller commenced the action for damages. The court needed to determine, if the buyer mad a lack of conformity notice in timely manner, namely to determine if the term in the seller's form became part of the contract).

91. The decision is surprising taking into consideration that most commentators interpreted Art. 19 CISG as incorporating the 'mirror-image' rule and it completely disregards the list of modifications given in paragraph 3. See DiMatteo, Larry A.: "The CISG and the Presumption of Enforceability: Unintended Contractual Liability in International Business Dealings", 22 Yale Journal of International Law, 1997 (Hereinafter: DiMatteo) p. 154-155 The additional terms drastically limit the seller's liability, therefore should amount to a material alteration. See Karollus, Martin: Judicial interpretation and application of the CISG in Germany 1988-1994, Cornell Review of the Convention on Contracts for the International Sale of Goods, 1995 (Hereinafter: Karollus)

92. France, Supreme Court (Fauba v. Fujitsu) January, 4 1995 (A French buyer ordered electronic components from a German seller. On March 22, 1990 the buyer placed a purchase order for batches of electrical components at the price previously offered by the supplier but "[t]o be reassessed in relation to market decreases". The following day the seller replied: "[T]he prices are subject to modification according to market increase or decrease, as agreed. We cannot proceed to record item 5 of the order, as version 70 NS does not yet appear as such a designation. We nevertheless will inform you as soon as possible of our earliest delivery date and we will inform you as soon as we are in a position to accept the first orders". On March 26, 1990 a telephone conversation took place between the parties in which they agreed to modify 'item 5' of the order, specifying the price and dates of delivery. Later, the buyer made a partial cancellation of the order to which the seller objected alleging that it had already dispatched the goods. Upon delivery the buyer rejected the goods in excess and requested the seller to take them back, which the seller refused and demanded payment.

According to Witz instead of holding in a highly questionable manner that the contract was formed at the time of the receipt of the March 23, 1990 correspondence, the judges could have established March 26 as the date of contract formation. Instead of viewing a modification of the contract as implicit in the telephone order, it would have been possible to characterize the correspondence on that occasion as forming a contract. See Witz, Calude: The First Decision of France's Court of Cassation Applying the U.N. Convention on Contracts for the International Sale of Goods, 16 Journal of Law and Commerce, 1997 (Hereinafter: Witz)

93. Ibidem

94. Honnold p. 167

95. Austria Oberster Gerichtshof [Supreme Court] March 20, 1997

96. Enderlein/Maskow p. 98

97. Secretariat's Commentary on the Draft Convention

98. Enderlein/Maskow p. 99.

The wording of the ULF was more precise Art. 7 (2) stated that a reply to an offer, which purports to be an acceptance but contains additional or different terms, which do not materially alter the terms of the offer, should constitute an acceptance unless the offeror promptly objects to the discrepancy. Also the delegate of the Netherlands suggested to insert the word "promptly" instead of "without undue delay" when making observations on Art. 17 (2) of the Draft Convention. See Comments on the Draft Convention

99. First Committee Deliberations (Meeting No. 17 and 18)

100. It reaches the offeror, when it is made orally to him or delivered by any means to him personally, to his place of business, mailing address or habitual residence (Art. 24 CISG).

101. According to Art. 27 CISG any communication made by reasonable means of the party in accordance with the provisions of Part. III of the CISG, any delay or error in the transmission of the communication and even its failure to reach the addressee will not deprive the party of the right to rely on the communication.

102. Cross-References and Editorial Analysis, Art. 19 ed. Pilar Perales Viscasillas at <http://www.cisg.law.pace.edu/cisg/text/cross/cross-19.html> (Hereinafter: Editorial Analysis, Art. 19)

103. Secretariat's Commentary on the Draft Convention

104. The rule laid down in Art. 19 (2) CISG allows the initial offeror to object without any valid reason. Schlechtriem: Battle of the Forms p.45. Being aware of the problem, during the drafting process, the delegate of the Netherlands suggested, that in the event the offeror objects, the offeree should have a possibility to withdrew the modifications thereby saving the contract. Vergne p. 256

105. Art. 7 ULF read:

  1. An acceptance containing additions, limitations or modifications shall be a rejection of the offer and shall constitute a counter-offer.

  2. However, a reply to an offer which purports to be an acceptance but which contains additional or different terms of the offer shall constitute an acceptance unless the offeror promptly objects to the discrepancy, if he does not so object, the terms of the contract shall be the terms of the offer with the modifications contained in the acceptance.

106. Bianca/Bonell p. 175

107. Than Art. 7 was supposed to have three paragraphs, were para. 2b would expressly address the issue of battle of forms.

The proposed Art. 7 (2b) stated: "If the offer and reply which purports to be an acceptance are on printed forms and the non-printed terms of the reply do not materially alter the terms of the offer, the reply constitutes an acceptance of the offer even though the printed terms of the reply materially alter the printed terms of the offer unless the offeror objects to any discrepancy without delay. If he does not so object the terms of the contract are the non-printed terms of the offer with the modifications contained in the non-printed terms of the acceptance plus the printed terms on which both forms agree".

Paragraph three was intended to deal with letters of confirmation but also address the use of printed forms. Art. 7(3) stated:

"If a confirmation of a prior contract of sale is sent within a reasonable time after the conclusion of the contract, any additional or different term in the confirmation (which are not printed) becomes part of the contract unless they materially alter it, or notification of objection to them is given without delay after receipt of the confirmation. (Printed terms become part of the contract if they are expressly or impliedly accepted by the other party.)" Both paragraphs had been rejected by the Working Group. See Secretariat's report on formation of contracts

108. Working Group Meeting No. 8

109. Draft Convention on International Sale of Goods, approved by UNCITRAL and submitted for amendments and adoption to the Vienna Conference.

110. The amendment proposed would read as follows: " When the offeror and the offeree have expressly (or implicitly) referred in the course of negotiations to general conditions the terms of which are mutually excusive the conflicting clauses should be considered not to form an integral part of the contact". (First Committee Deliberations, Meeting No. 10). At the same meeting it was also acknowledged, the issue of battle of the forms is not yet ripe for resolution, as even the term "general conditions" is in itself controversial (opinion of the Greek representative).

111. Schlechtriem, Peter: Uniform Sales Law, Vienna, 1986 (Hereinafter: Schlechtriem 1986) p. 56

112. Prior the work started on the unification of the sales law under the auspice of the UNCITRAL, the wider use of standard contract terms and the unification through standard clauses have been considered. It have been recognized that one of the methods of sales law unification is through unification of standard contract provisions and general conditions of sale, as they are being used in almost every line of the world trade and cause considerable problems. In order to avoid the application of divergent national laws, a solution at international level is desirable (Secretary-General: Standard Contracts). Even if standard terms have been on the agenda of the UNCITRAL, at the time, the CISG have been debated and adopted, the sales law unification work under the auspice of the UNCITRAL have just started, with initial researches of the present state of affairs and needs in this field, but without any workable solution and official standpoint on the matter.

113. Schlechtriem 1986, p. 56

114. First Committee Deliberations, Meeting No. 10 (Proposals of the United Kingdom and Bulgaria)

115. First Committee Deliberations, Meeting No. 10 (Argument of the French delegate)

116. The proposal closely followed art. 7 of the ULF. It stated: "A reply to an offer containing additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer." (See Secretariat's Commentary on the Draft Convention). It was only decided that the word offer needs an addition "which purports to be acceptance" in order to avoid situations where mere inquiries will become acceptances. (Comments of Governments)

117. It has been proposed para. 2 should be deleted, completely. The arguments raised for its deletion were that it is very difficult to distinguish what constitutes a material alteration, that it impliedly incorporates acceptance of the offer by silence, that what is important to one party might be insignificant to the other, concluding: the 'mirror image' rule have to stay as a sole solution to the deviating acceptance. It is recognizable, the traditionalist has launched the proposal, but the battle has been won by the reformers. Para. 2 had been retained, considering being useful in a common practical situation where both parties believe there is a valid contract despite smaller discrepancies in the offer and acceptance. See Working Group, Meeting No. 9. Despite being subject to controversies, it is held to follow the modern trend in contract law, found both in common and civil law systems. See Vergne p. 257

118. Austria was the first who suggested the addition of para. 3 that would define non-material alterations. It observed that in a battle of the forms situation where changes are only of immaterial nature, the offeror will have to react quickly in deciding if the changes in the acceptance are of a material nature, hence the provision places the burden on the offeror. He runs a major risk of being responsible for not performing under a contract, if he treats a reply as a counter -offer, believing no contract have been formed, which the court later on finds being a reply and therefore a sufficient action for contract conclusion. Lead with this consideration, Austria suggested the addition of a new, third paragraph that would define non-material alterations. Czechoslovakia agreed with the proposal, arguing that the words which do not materially alter the terms of the offer" are too vague and can be easily subject of divergent interpretations. See Comments on the Draft Convention

119. The final Draft of Art. 17 as adopted by the UNCITRAL and submitted to the general meeting of the UN is the following:

  1. A reply to an offer, which purports to be an acceptance but contains additions, limitations or modifications is a rejection of the offer and constitutes a counter-offer.

  2. However, a reply to an offer which purports to be an acceptance but which contains additional or different terms which do not materially alter the terms of the offer shall constitute an acceptance, unless the offeror objects to the discrepancy without undue delay. If he does not so object, the terms of the contract are the terms of the offer with the modifications contained in the acceptance.

  3. Additional terms relating, inter alia, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party's liability to the other or the settlement of disputes are considered to alter the terms of the offer materially, unless the offeree by virtue of the offer or the particular circumstances of the case has reason to believe they are acceptable to the offeror. (See UNCITRAL, Meeting No: 11)

120. van Alstine

121. del Pilar Perales Viscasillas, Maria: Battle of the Forms and the Burden of Proof: An Analysis of BGH 9 January 2002, Vindobona Journal of International Commercial Law and Arbitration (2002), No. 2 (Hereinafter: del Pilar Perales Viscasillas: BGH Decision) p.217

122. Which can be revealed by an examination of the drafting history and its provisions (in particular articles 18(1) and 19(1) CISG). See van Alstine

123. This criticism is unanimous amongst the scholars who are against the 'last-shot' rule. Del Pilar Parales Viscasillas: Battle of the Forms

124. Ibidem

125. del Pilar Perales Viscasillas: BGH Decision p.217

Though if there is no unambiguous agreement on the essential elements of the contract, courts will find, there is no binding contract. See Germany, Appellate Court Frankfurt March 31, 1995.

126. Germany, Appellate Court Saarbrücken January 13, 1993; United States, Federal District Court [Illinois] (Magellan International v. Salzgitter Handel) December 7, 1999; Germany, Appellate Court München March 11, 1998; Spain, Supreme Court (Nordgemüse Wilhelm Krogmann v. Javier Vierto) May 26, 1998; Germany, Supreme Court January 9, 2002 ("The fact that the mutual general terms and conditions partially contradicted each other did not prevent the existence of the sales contracts because the parties did not view this contradiction as an obstacle to the execution of the contracts. They did not consider the alteration material within the meaning of Art. 19 (3)"); Spain , Supreme Court February 17, 1998("Documents presented by the parties is sufficient to show there was a contract".

127.

128. France, Supreme Court (Les Verreries de Saint Gobain v. Martinswerk) July 16, 1998

129. Germany, Landgericht [Lower Court] Kehl October 6, 1995

130. Germany, Appellate Court Düsseldorf July 25, 2003

131. del Pilar Perales Viscasillas: BGH Decision p.217

132. 132 The distinction has been taken from Blodgett, and will be followed in the thesis. Nevertheless it have to be noted, in practice it might be difficult to determine when the party intended to confirm and when to replace the prior oral agreement. See Blodgett, Paul C.: The U.N. Conevtnion on Sale of Goods and the "Battle of the Forms", of 18 Colorado Lawyer (March 1989) (Hereinafter: Blodgett)

133. It have to be emphasized the additions and/or modifications are often contained in confirmation letters but not always. The form the alterations are embedded is not important for the existence of a modification. Nevertheless, finding a solution for the battle of the forms is more doubtful if confirmation letters are involved, as they are also not death with by the CISG.

134. This commercial instrument of a German origin has been probably left out because there are considerable differences in its regulation in some Civil law (like Germany, Austria, Switzerland, and France) and Common law countries. See del Pilar Perales Viscasillas, Maria: The Formation of Contracts and the Principles of European Contract Law, 13 Pace International Law Review (Fall 2001), (Hereinafter: del Pilar Perales Viscasilla: PECL) p. 392; See also Esser, Michael: Commercial Letters of Confirmation in International Trade: Austrian, French, German and Swiss Law and Uniform Law Under the 1980 Sales Convention, 18 Georgia Journal of International and Comparative Law, 1988 (Hereinafter: Esser)

135. Despite disagreement on the issue, some courts without going into discussion whether confirmation letters are within the scope of the CISG, disregarded the disagreement and proceed with deciding on the merits of the case. See Germany, Supreme Court January 9, 2002

136. Blodgett p. 427

137. Ibidem

138. Art. 2.1.12 of the UPICC states: "If a writing which is sent within a reasonable time after the conclusion of a contract and which purports to be a confirmation of the contract contains additional or different terms, such terms will become part of the contract, unless they materially alter the contract or the recipient, without undue delay, orally objects to the discrepancy or dispatches a notice to that effect." Similar provision is contained in PECL (Art. 2:210).

139. On the other hand, one court applied the formation provisions of the CISG to find that the recipient of the letter of confirmation had accepted its terms by accepting the goods. See Germany, Oberlandesgeripcht [Court] Saarbrücken January 13, 1993

140. Some decisions refused to give effect to a local trade usage because the usage was not international. (Germany, Oberlandesgericht [Appellate Court] Dresden July 9, 1998; One court gave effect to local trade usages when both, the seller and buyer had their places of business in a jurisdiction that recognized such a usage (Germany, Oberlandesgericht [Appellate Court] Frankfurt July 5, 1995)

141. Prof. Schlechtriem also agrees there is no consensus on the issue of confirmation letters, but finding a solution under the CISG is preferable, as the fragmentation on contract formation should not be allowed by Art. 7 (1) CISG. As a solution, he proposed a classification of confirmation letters as trade usages. Schlechtriem 1986, p. 57

142. However different solutions are possible. One court held, despite the explicit rule in Art. 18 (1) CISG, silence will be sufficient to show agreement taking into consideration all the circumstances of the case. See Germany, Appellate Court Köln February 22, 1994 (Parties concluded an oral agreement for the sale of wood, and the seller sent a telefax confirming the agreement. After discovered the good have been non-confirming the buyer immediately made a notification, on which the seller replied he would go personally to Germany where he intended 'to market' the goods himself. The court had to determine whether there was a valid agreement on contract termination. The court held that the contract had been validly concluded with the oral agreement and that the buyer's letter of confirmation merely proved its existence. Moreover, it also ruled, the offer and acceptance rules recited in the formation provisions of the CISG (Arts.14- 24) apply to a termination by agreement pursuant to Art. 29(1). The court stated: "An offer to cancel can, therefore, pursuant to CISG Art. 18(1), not be accepted by silence or inactivity of the other party; together with other circumstances, however, silence can be important and may be interpreted as the acceptance of an offer of cancellation.")

143. United States, Federal Appellate Court [9th Circuit] (Chateau des Charmes Wines Ltd. v. Sabaté USA, Sabaté S.A.) May 5, 2003. (A Canadian buyer and a French seller concluded a contract for the sale of wine corks. Parties agreed on essential contractual elements via telephone, but the seller with each delivery sent an invoice containing a choice of forum clause in favor of a French courts. When the buyer filed an action in California to claim damages, the sellers invoked the clause in the invoices.)

144. In reaching the conclusion, the court reasoned the following: "It is true that under CISG, a contract may be modified or terminated by the mere agreement of the parties (Art. 29(1) CISG). However, additional or different terms relating, inter alia, to the settlement of disputes are expressly considered to alter the terms of the offer materially (Art. 19(3) CISG)." In the case at hand, there was no indication that the buyer agreed, expressly or by conduct (Art. 8(3) CISG) to the forum selection clauses.

145. United States, Federal District Court [New York] (Calzaturificio Claudia v. Olivieri Footwear) April 6, 1998. (An Italian manufacturer soled shoes to the buyer located in the United States. There was no formal written contract neither purchase orders setting forth the terms of the parties' sales transactions, but the seller invoiced every shipment. The invoices were marked "Ex works". In analyzing all the relevant circumstances of the case (Art. 8(3) CISG) the court was unable to conclude as a matter of law that buyer agreed to or intended to be bound by the invoice terms. The court considered the parties' prior course of dealings, which included thirteen transactions, but found insufficient evidence to conclude that they had always used the same delivery term, concluding that the seller has not presented sufficient evidence to demonstrate conclusively the parties' prior practices. The court stated: under the CISG, "all material terms of [an] acceptance should mirror the offer" thereby referring to Art. 19 CISG material modifications, including the alteration of delivery terms, often occur in "the routine exchange of the buyer's printed purchase order and the seller's printed acknowledgment of sale form", but "no contract results from such an exchange if the purported acceptance contains additional or different terms that materially alter the offer.")

146. DiMatteo at all note 306

147. Blodgett

148. The rationale of the 'mirror-image' rule is based on an expectation that the original offeror, making an offer according to his own terms, cannot anticipate being bound on terms other than those that he presented, as each part of a contract, not just its essential elements are of a value to the offeror. While the common law rule does not assume that any change to the offer is necessarily a deal-breaker, it contemplates that the offeror will wish to weigh and reconsider any change. The 'mirror-image' rule asserts that additions or modifications to the offer render that offer void, and the changes become a counter-offer, or a 'last shot'. Chirelstein, Marvin A.: Concepts and Case Analysis in the Law of Contracts 58 (3d ed. 1998), p. 54 in Sukurs, Charles: Harmonizing the Battle of the Forms: A Comparison of the United States, Canada, and the United Nations Convention on Contracts for the International Sale of Goods, Vanderbilt Journal of Transnational Law, 2001 (Hereinafter: Sukurs) p. 1486

149. DiMatteo at all

150. Gabriel, Henry D.: A Primer on the United Nations Convention on the International Sale of Goods: From the perspective of the Uniform Commercial Code, 7 Indiana International & Comparative Law Review, 1997 (Hereinafter: Gabriel) p. 1054 (The 'last-shot' rule "is the logical result of the 'mirror-image' rule'") See also van Alstine ("The 'last -shot' merely operates as a self-evidently correct extension of the 'mirror-image' rule")

151. DiMatteo at all

152. van Alstine

153. Similarly, del Pilar Parales Viscasillas: Battle of the Forms

154. "Such behavior - more appropriate in a tennis game than in real business - is anti-economical and places more of a premium on routines (matter of form) than business realities (matters of substance)." del Pilar Parales Viscasillas: Battle of the Forms and Rick Rawlings, The Battle of the Forms, 42 Mod. L. Rev. 715 (1979) in Sukurs p. 1487

155. Honnold, John O.: Uniform Law for International Sales under the 1980 United Nations Convention, 3d ed, 1999 in Spanogle/Winship p.117

156. The 'last-shot' rule is a "formalist fiction." Gabriel p. 1053

157. Honnold, John O.: Uniform Law for International Sales under the 1980 United Nations Convention, 3d ed, 1999 in Spanogle/Winship p.117

158. van Alstine

159. Ibidem

It is also a paradox that Art. 19 (2) CISG is designed to protect the offeror by giving a chance for an objection on a contract formation, yet the offeror will usually found itself bound to the terms contained in the other party's form.

160. Honnold, John O.: Uniform Law for International Sales under the 1980 United Nations Convention, 3d ed, 1999 in Spanogle/Winship p.116

161. Honnold, John O.: Uniform Law for International Sales under the 1980 United Nations Convention, 3d ed, 1999 in Spanogle/Winship p.117

162. Gabriel p. 1054

163. Honnold

164. Prof. Honnold suggests the following practical test of fairness: supposedly after arrival, the buyer rejected the goods. The 'last-shot' theory, according to which there was no contract until the buyer accepted the goods, and consented to the deviating acceptance by performance, would support the rejection. There was no valid contract and the buyer was under no obligation to accept the goods. However, it is difficult to conclude that such a rejection, in view of the transportation and redisposal costs typical in international sales, would be consistent with commercial expectations and standards of good faith and fair dealing. See Honnold, John O.: Uniform Law for International Sales under the 1980 United Nations Convention, 3d ed, 1999 in Spanogle/Winship p.117

165. del Pilar Parales Viscasillas: Battle of the Forms

166. Ibidem

The 'last-shot' rule have been extensively used under the old ULF (OLG Hamm, 7 December 1978 (2 U 35/78); OLG Hamm, 18 October 1982 (2 W 29/82); OLG Hamm, 18 October 1982 (2 W 29/82Ft. 12) in del Pilar Perales Viscasillas: BGH Decision

167. United States, Federal District Court [Illinois] (Magellan International v. Salzgitter Handel) December 7, 1999

168. Sukurs p.1499

169. Ibidem

170. Ibidem

171. Germany, Appellate Court Saarbrücken January 13, 1993 (A German buyer ordered doors from a French manufacturer for resell. The seller sent to the buyer a letter of confirmation containing (printed on the back) its standard terms according to which 'Notice of defects is valid only if made within 8 days after the date of delivery'. When the buyer stopped payment and claimed non-conformity the seller commenced the action for damages, holding, buyer's notice was not timely. The court held the sales contract had been validly concluded. The seller indisputably asserted that all of its deliveries were subject to its standard conditions of sale. The buyer never accepted the terms therein, not even implicitly, but it accepted the first delivery, which was made in accordance with the confirmation of order and placed further orders with the seller. Each confirmation contained the seller's standard conditions of sale. The Court noted that the buyer's taking delivery of the goods constituted conduct indicating assent to the offer and amounted therefore to an implied acceptance of the standard terms (Art. 18(1) CISG), hence the buyer was obliged to raise any objection in within the time limit set in the general conditions of sale of the seller).

172. ICC Arbitration Case No. 8611 January 23, 1997 (In this case a "contract of representation" have been concluded. Subsequently, numerous individual purchases had been concluded. When the dispute arose over the terms of the contract, the panel held, that because the seller sent more times attached to the invoice its standard terms and the buyer did not object, not once, therefore he impliedly accepted the conditions of the seller, and they become an integral part of the contract).

173. Germany Appellate Court München March 11, 1998 (An Italian seller and a German buyer contracted the sale of cashmere textiles. The parties agreed upon the application of the standard terms of the 'German textile and clothing industry'. However, the seller's reply contained its own General Conditions, which the court held to be a counter-offer (Art. 18&19 CISG) which the buyer accepted by accepting the delivery. "The application of German law is a result of a corresponding stipulation in [seller]'s General Conditions, which supplement the Standard Conditions of the German Textile and Clothing Industry". Nevertheless, the court did not explain its reasoning with the said provisions. Hence, the court accepted the 'last-shot' rule in contract formation merely referring to the above provisions but without comment).

174. Germany, Appellate Court Frankfurt (Shoes case) May 23, 1995 (The buyer claimed to have ordered a 3.240 pairs of shoes, which according to the court constituted an offer pursuant to Art. 14 CISG and the delivery by the seller amounted to an acceptance by performance (Art. 18(3) CISG). However, since the delivery of a different quantity of goods materially alters the terms of the offer (Art. 19(3) CISG), the seller's delivery of 540 pair less was to be considered a rejection of the offer and constituted a counter-offer (Art. 19(1) CISG) which the buyer accepted by taking the goods. Hence, according to the Court the contract was then concluded only with regard to the lesser quantity of shoes, which indeed had been delivered by the seller).

175. Schlechtriem: Battle the the Forms

176. Ibidem

177. del Pilar Perales Viscasillas: Battle of the Forms

178. Schlechtriem: Battle of the Forms

179. del Pilar Perales Viscasillas: Battle of the Forms

180. van Alstine

181. Ibidem

182. Ibidem

183. Ibidem

184. Party autonomy, as one of the basic principles on which the CISG is based is incorporated into Art. 6 CISG, the parties may exclude the application of the CISG or derogate from or vary the effect of any of its provision.

185. Art. 6 CISG incorporates the principle of party autonomy into the CISG and Arts. 8 and 9 CISG reinforce and apply it, whereas Art.11 CISG serves to complete the circle. van Alstine

186. The main provision on the interpretation of the parties' intent is Art. 8 CISG according to which para 1. statements and other conduct of a party "are to be interpreted according to his intent where the other party knew or could not have been unaware what that intent was." In practice, it may of course be a difficult task for a party to prove that the other party had actual knowledge of its unexpressed subjective intent. This supplement to the "subjective" standard provides that the actual intent of the speaker or actor will govern if the other party "could not have been unaware" of that intent. Therefore, para. 2 sets forth an objective standard, relaying on reasonableness of the other party. Art. 8(2) prescribe that the ambiguous statement or unclear conduct is to be interpreted "according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances." "The knowledge or the possibility of knowing certain, usually referred to, clauses of the other side can also become important for the interpretation of a party's conduct. Where such interpretation of one party's conduct is not possible or cannot be sufficiently proven, one should stick to the basic rule that colliding terms of business remain unrecognized for the contents of the contract and will be replaced by statutory rules" Schlechtriem: Battle of the Forms

187. van Alstine

188. For example, where there is a common understanding between the parties on the applicability of a particular usage, whether express or reasonably implied from the circumstances, Art. 6 CISG mandates that that understanding supersede even the express rules of the CISG. Ibidem

189. Karollus

190. van Alstine

191. Karollus

192. Schlechtriem: Battle of the Forms. The German Supreme Court in its decision from January 9, 2002 contained the following defense clause: "We sell exclusively pursuant to our general terms and conditions. Contrary statutory conditions or contrary general terms and conditions of the buyer are expressly not acknowledged and are therefore not part of the contract."

193. Germany, Bundesgerichtshof [Federal Supreme Court] 9 January 2002 (powdered milk case).

194. Despite its sometimes not clear reasoning, the message of the German Supreme Court was "conflicting standard forms [terms] are entirely invalid and are replaced by CISG provisions, while the contract as such remains valid". See Schlechtriem: Battle of the Forms However, according an opposite view, in the case at hand, the court basically failed to apply both the' last-shot' and the 'knock-out' doctrines in determining the contract terms and give effect exclusively to the defense clause in the seller's terms. Thereby the court ignored the conflict between the forms (there was not real contradiction between the clauses). Hence, it is not clear why the Supreme Court search the legal literature regarding the battle of the forms. del Pilar Perales Viscasillas:BGH Decision

195. The seller's form contained a clause: The buyer must inspect the goods immediately upon delivery and note any complaints on the delivery note … Defects that are not noticeable at the time of delivery can only be claimed before the printed expiration date … The buyer must make available the goods at issue or enough samples of the goods at issue; if he does not do so, the buyer cannot make any warranty claims." The buyers form contained the following clause: Notwithstanding any duty of the seller to pay back the purchase price, or a part thereof, the liability of the seller for damages suffered (and/or to be suffered) is at all times limited to the invoiced amount for the delivered goods."

196. Prof. Schlechtriem notes, here the court erroneously invoked Art. 7(1) CISG. See Schlechtriem: Battle of the Forms

197. The decision of the Court is not clear as to whether it refers to the existence of a choice of law clause in the general conditions or to a tacit and partial exclusion of the warranty and quality terms of the CISG, or both. In any event, the Court stated that the CISG is the relevant law to decide the case. del Pilar Perales Viscasillas: BGH Decision

198. Germany, Lower Court Kehl (Knitware case) October, 6 1995 (A German buyer and an Italian seller concluded a contract for the sale of fashion goods. Each of them relied on its own standard terms, which contained, inter alia, a choice of law clause respectively in favor of German law and of Italian law. The buyer based his order on the sample delivered by the seller. However, after delivery the buyer refused to pay the purchase price alleging that the goods did not conform to the contract and soon thereafter declared the contract avoided).

199. The court interestingly noted that the choice of law clause contained in the German buyer's standard terms did not become part of the contract as the buyer failed to give evidence that it had sent its general conditions of purchase in a language other than German, which was not the language of the contract. The question is, would it make any difference, if the standard terms would be translated into Italian? Would the terms than be sufficient to comprise part of the contract or the court just intend to emphasize how important the language of the communication is?

200. Art. 6 CISG can also relate to the process of contact conclusion. Schlechtriem: Battle of the Forms

201. Germany, Appellate Court Düsseldorf July 25, 2003

202. France, Supreme Court (Les Verreries de Saint Gobain v. Martinswerk) July 16, 1998 (A French company, placed successive orders with the seller, a German company, for products to be used in glass manufacturing. Buyer's general conditions of purchase, printed on the reverse side of the order form, contained a forum selection clause in favor of a French forum. The seller replied by sending a confirmation of order, which contained a forum selection clause in favor of a German forum. After delivery the buyer claimed non-conformity of the quality and commenced proceeding in front of French court. The court invoked Arts. 18 and 19 CISG concluding that the forum selection clause in the buyer's standard form has never been agreed to by the seller, because the seller's own form contained the same clause with different content stipulating the jurisdiction of German courts. As it falls under a "settlement of dispute" constitutes a material alteration (Art. 19 (3) CISG) the alteration should be explicitly agreed at in order to become part of the contract. As the seller's form was sent the last, by not giving effect to the terms therein, the court rejected the 'last-shot' rule. The court impliedly opted for the 'knock-out' rule by reaching after the Brussels Convention to determine which court has jurisdiction to hear the case). See also France, Supreme Court (Mode jeune diffusion v. Maglificio) December 2, 1997 (A French buyer ordered goods from the Italian clothing dealer. The order form contained a forum selection clause in favor of a French forum. The seller delivered the goods and issued an invoice, which contained a forum selection clause in favor of an Italian forum. Claiming that the goods delivered were non-conforming, the buyer commenced an action against the seller before a French court. The typical battle of forms case the court solved by not giving effect to either of the forum selection clauses, but to the CISG, which lead, by virtue of the private international law rules to the application of the Italian law).

203. Spain, Supreme Court (Nordgemüse Wilhelm Krogmann v. Javier Vierto) May 26, 1998; Spain, Supreme Court February 17, 1998. In the two very similar case, after a number of different communication did not reach an express agreement to arbitrate. When disagreement arose parties conducted an arbitral proceeding. However, when the request for recognition of the arbitral awards have been made, the Supreme Court held, there is no valid arbitration clause (referring to Art. 18 and 19 CISG) and denied the request. The contracts as such remain valid and the CISG was the applicable law.

204. In the above cases conflict arise on jurisdiction and arbitration clauses. Since the CISG deals with the sales contract, its formation, and rights and obligations of the parties. Hence, the validity of choice of law clauses will be determined by Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (hereinafter Brussels Regulation), Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter New York Convention) and Convention on the Law Applicable to the Contractual Obligations (hereinafter Rome Convention) respectively. The Brussels Regulation in Art. 23(1) on prorogation of jurisdiction, states the agreement needs to be in writing or evidenced in writing. The same condition is contained in Art. II (1,2) NY Convention. What does "writing" mean is also disputable, does the clause needs to be in a language that the negotiations have been conducted, can it be on the back pf the form, not above the signature and correspondence exchanged by e-mail or fax, are all questions that have to be answered in every instant case. The Rome Convention in Art. 3 (1) have a somewhat more flexible formulation. The choice must be expressed or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case.

205. del Pilar Perales Viscasillas: BGH Decision

206. According to del Pilar Perales Viscasillas in situations like this the 'last-shot' rule should be applied. Moreover, the apparent severity of the 'last-shot' rule, may force the parties to pay attention to standard clauses. del Pilar Perales Viscasillas: Battle of the Forms

207. United States, Federal District Court [New York] (Filanto v. Chilewich) April 14, 1992

208. Dodge, William S.: "Teaching the CISG in Contracts", 50 Journal of Legal Education (March 2000) (Hereinafter: Dodge)

209. Shortly after Filanto sued Chilewich for breach of contract, Chilewich's agent complained that some of the boots were defective. In response to this complaint, Filanto relied on a provision of the Russian Agreement that it previously purported to exclude. The district court viewed this reliance as "an admission in law by Filanto" that it was bound by the terms of the Russian Agreement.

210. The second (and more doubtful) ground on which the court's ruling may be justifiable is that the faith of arbitration clauses is determined differently from other clauses. The court distinguished the issue of contract formation, on which the parties had focused, from the question of whether an agreement to arbitrate had been made. Because it was dealing with a motion to stay pending arbitration, the court ruled, only the latter was before it. If it found an agreement to arbitrate, all further issues -- including the question of whether the parties had formed a contract of sale -- would be for the arbitrators. In other words, the court contemplated the possibility that it might find a valid agreement to arbitrate even though the contract of which it was a part of might later be found not to exist, and basically decided not to go into the battle of forms problem. However, it is sometimes necessary to consider issues related to the formation of the contract in order to determine whether the parties have agreed to arbitrate. See Dodge. Moreover, in reaching for the possibility to separate the two problems the court cited Teledyne, Inc. v. Kone Corp, a Ninth Circuit US case!

211. The court reasoned the following: "That section, as the Commentary to the Sale of Goods Convention notes, reverses the rule of Uniform Commercial Code § 2-207, and reverts to the common law rule that "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". Sale of Goods Convention Article 19(l). Although the Convention, like the Uniform Commercial Code, does state that non-material terms do become part of the contract unless objected to, Sale of Goods Convention Article 19(2), the Convention treats inclusion (or deletion) of an arbitration provision as "material", Sale of Goods Convention Article 19(3). The August 7 letter, therefore, was a counteroffer…."

212. The court was not reluctant to acknowledge that the CISG and not the UCC applied in the instant case. It stated: "While defendant contends that under Uniform Commercial Code § 2-207 this action would be viewed as an acceptance with a proposal for a material modification, the Uniform Commercial Code, as previously noted does not apply to this case, because the State Department undertook to fix something that was not broken by helping to create the Sale of Goods Convention which varies from the Uniform Commercial Code in many significant ways. Instead, under this analysis, Article 19(l) of the Sale of Goods Convention would apply". Dodge

213. Brand, Ronald A; Flechtner, Harry M.: Arbitration and Contract formation in the International Trade: First Interpretations of the U.N. Sales Convention, 12 Journal of Law and Commerce, 1993 (Hereinafter: Brand/Flechtner)

214. Netherlands, Appellate Court 's-Hertogenbosch (ICT v. Princen Automatisiering Oss) November 19, 1996

215. France, Appellate Court Paris (ISEA Industrie v. Lu) December 13, 1995

216. Bogianno, Antonio: Internationa Standard Contracts, Graham &Trotman / Martinus Nijhoff, Dordrecht/Boston/London, 1991 (Hereinafter: Bogianno) p. 134 CISG makes difference between the practices established between the parties and trade usages (Art. 9 CISG). For practices it is important that the parties established a business relationship by acting in a similar way under similar circumstances, repeatedly through a certain period of time (Bout, Patrick X.: Trade Usages: Article 9 of the Convention on Contracts for the International Sale of Goods, (Hereinafter: Bout). English court decisions established certain criteria for implied incorporation of standard terms.

  1. An existence of a previous course of dealing is necessary. It has to be consistent, only a few transactions over a longer period of time are not sufficient.
  2. The bargaining power of the parties has to be equal or close to equality.
  3. Previous dealings are effective only if there is a proof of actual knowledge of the standard terms and assent to them is not prevalent by the other party (Bogianno p. 59; Spanogle/Winship p. 62)

217. Awareness can be achieved by transmitting the text to the contract or making it available on another way. Hence, a simple referral is not enough. (Germany, Bundesgerichtshof [Federal Supreme Court] October 31, 2001; Netherlands, Gerechtshof [Appellate Court] Arnhem April 27, 1999; Netherlands, Arrondissementsrechtbank [District Court] 's-Hertogenbosch, October 2, 1998). One court even found that even sending the entire text of standard terms at the beginning of the parties' business relationship (when making the first order) was not sufficient to demonstrate the parties' intention to include the terms into the contract and the party failed to prove that it made available the document to the other party. The court stated: "Even if the buyer apparently sent its condition of purchase at the begging of the business relationship ….it does not suffice…to give raise to the assumption that the seller actually received the buyer's standard conditions of purchase." Germany, Appellate Court Düsseldorf July 25, 2003.

The "rule on communication" was established by a landmark decision of a German Supreme Court from October, 31 2001.This decision establishes a two-part test. 1. The intent of the party to include its standard terms into the contract has to be apparent to the other contracting party, evaluated under Art. 8 CISG. 2. Standard terms have to be made available, by communication of their full text. The addressee is under no obligation to search out the standard terms referred to in the contract, as it would be place the burden of risks being bound by unknown terms on a disadvantaged party and would be contrary to principles of good faith and fair dealing (Art. 7(1) CISG) and also to the general obligation of cooperation and information of the parties. The significance of the decision is demonstrated by the fact that another court in the case (Germany, Appellate Court Düsseldorf July 25, 2003) applied the same method in determining if standard terms become part of a contract, even referring to the landmark decision to support its ruling.

218. PECL in Art. 2:104 sets an alternative requirement, "before or when the contract was concluded." However, one court decided that the seller failed to bring the general conditions to the buyer's attention in time, meaning before the conclusion of the contract. See Netherlands, Appellate Court 's-Hertogenboch October 16, 2002

219. The language of communication should be alternatively, the language of the addressee, the language that was previously agreed on or used by the parties in prior dealings or is customary in trade. See Germany, Landgericht [District Court] Heilbronn September 15, 1997; Germany, Amstgericht Kehl October 6, 1995; Germany, Oberlandesgericht [Appellate Court] Hamm February 8, 1995 For a different ruling see Germany Appellate Court Köln (Shock-cushioning seat case) May 24, 2006 (It does not matter that the standard terms in the seller's form were on Dutch, a foreign language to the buyer, because the buyer did not make any objection to the application of standard terms written in Dutch).

220. Di Matteo at all

221. See Arts. 2.1.19-2.1.22 UPICC. According to art. 2.1.19 (1) UPICC the rules apply equally, when only one or both parties use their standard forms. Nevertheless, except 2.22 UPICC the others are most likely to apply in case of contracts of adhesion, designed to protect the weaker party.

222. The formation provisos of the UPICC are in general more flexible than the CISG. Accepts contracts that are formed by offer and acceptance as well as "by conduct … sufficient to show agreement." (Art. 2.1.1. UPICC). The contract formation rule of the UPICC would in fact lead to the application of the 'last-shot' rule in determining the terms of the contract without an explicit provision that incorporates the opposite rule, the 'knock-out' rule in the battle of the forms. Art. 2.1.11 is titled modified acceptance, which corresponds Art. 19 (1) and (3) CISG, and Art. 2.1.6. (1) UPICC corresponds to Art. 18 (1) CISG. See also Maria del Pillar: Battle of the Forms

223. Murray: Chaos Revisited also Maria del Pillar: Battle of the Forms, Spanogle/Winship p. 118-119

224. Schlechtriem: Battle of the Forms

225. Murray: Chaos Revisited

226. The conclusion is arrived at form Art. 2.1. 19 UPICC (1) stating that when one or both parties use their standard forms in course of contract conclusion the general rules on contract formation apply. Art. 2.1.2 defines the offer, as a sufficiently definite proposal that also indicates the intention of the offeror to be bound by the acceptance.

227. del Pilar Perales Viscasillas: Battle of the Forms

228. Ibidem

229. Murray: Chaos Revisited p. 43

230. At. 2:209 PECL is an exception from Art. 2:208 on modified acceptance. though the PECL does not insist on contract formation solely based on an offer and acceptance, the starting point for contract formation is the 'mirror-image' rule in Art. 2:208 PECL. PECL also allows contracts to be formed when the discrepancies does not substantially alter the terms of the offer. Art. 2:208 (3b) PECL corresponds to Art. 19(2) CISG. if the requirement thereof is not fulfilled, the new terms will transform the acceptance into a counter-offer (Art. 2:208 (3c) PECL).

231. Art. 2:104 PECL

232. Art. 1:103 PECL

233. Schlechtriem: Battle of the Forms

234. Ibidem

235. Baird, Douglas G.; Weisberg, Robert: Rules, Standards and the Battle of the Forms: A Reassessment of Section 2-207, 68 VA. L. REV., 1982 (Hereinafter: Baird/Weisberg), p. 1225

236. Relaying on Cmt 1 it can be concluded the battle of the forms falls under a contract formation by an offer and acceptance under the regulatory scheme of § 2-207 UCC. According to the Comment, when contracts are concluded with an offer and acceptance, a frequent example is the exchange of printed purchase orders and acceptance forms, sometimes called "acknowledgements." Relaying on Cmt 1 Prof. Wladis concluded, the UCC explicitly deals with the battle of the forms, but he also came to a conclusion, § 2-207 deals with three kinds of situations, where he considers the battle of the forms separately under the regulatory scheme of the UCC. (See Wladis, John D.: U.C.C. Section 2-207: The Drafting History, 49 Bus. Law, 1994 (Hereinafter: Wladis) p. 1035) On the other hand, he concluded, when the forms are in battle, the writings will not establish a contract, § 2-207(3) UCC will in fact deal with the issue. See the discussion under C (formation of contract via conduct of the parties)

237. White/Summers

238. Hunter, Howard O.: Modern Law of Contracts, West Group, 1993 (Hereinafter: Hunter) § 4-19

239. Hunter § 4-20

240. Gord Industrial Plastics, Inc. v. Aubrey Manufacturing, Inc. 103 Ill.App.3d 380 (1982). The contract was concluded for purchase of molds for plastic production. In the course of contract conclusion both parties used their own standard forms. The contract has been executed accordingly but when defendant demanded return of the molds, plaintiff refused the delivery until a mold removal fee had been paid. Hence, the court had to decide whether the mold removal fee, a clause in defendant's form become part of the contract. The court ruled, defendant's form, containing an addition amounted to a counter-offer, which lacked an acceptance of the plaintiff. It rued the writings of the parties thereby did not constitute a contract, and applied § 2-207 (3) UCC in determining the terms of the contract, stating "Although the Uniform Commercial Code operates to make the formation of a contract not dependent upon a requirement that offers and acceptances perfectly reflect each other in every aspect, it still requires "a definite expression of acceptance and does not change the basic common-law requirement that there must be an objective manifestation of mutual assent"

241. It was meant to change the common law rule and reflect the way buyers and sellers actually function in the marketplace (Hunter § 4-24). See also 2 Anderson U.C.C. § 2-207:29 (3d. ed.), (Hereinafter: Anderson)

242. Baird/Weisberg p. 1220

243. Baird/Weisberg p. 1237

244. "Dickered" terms are terms to which the parties consciously reach at as contrasted with the standard terms in the fine print, which they typically ignore. (Murray: Chaos Revisited, note 19). Dickered terms are those that parties negotiated while undickered terms are equal to pre-formulated terms, standard terms.

245. Murray: Chaos Revisited p. 5

246. 17 C.J.S. Contracts § 52 (Hereinafter: C.J.S. Contracts)

247. U.S.--U S v. Braunstein, 75 F. Supp. 137 (1947)

248. Wladis p. 1045; In 1950 Llewellyn held a lecture on UCC for the Indiana State Bar Association Legal Institute, where he drew a sharp distinction between an acknowledgement that contained a language accepting the offer and an acknowledgement that did not. He was of an opinion; the first communication was probably an acceptance whereas the second was not. See Wladis p. 1045 Llewellyn's standpoint on the lecture made Wladis draw the above conclusion on the form acceptances.

249. Explanation given by Restatement is not enough. "An acceptance must comply with the requirements of the offer as to the promise to be made or the performance to be rendered." Restatement § 59

250. White/Summers

251. Wladis p. 1045

252. § 2-207 (2) UCC and cmt. 3

253. Stephens

254. Steiner v. Mobil Oil Co. 20 Cal.3d 90, 569 P.2d 751, 141 Cal.Rptr. 157 (1977). The service station operator brought an action against a major oil company for seeking declaratory and monetary relief with respect to the price of the gasoline. The parties after long negotiations signed the documents, but Plaintiff later noticed, one of the forms stated defendant can change the competitive allowance at any time. Without certainty on the guaranteed discount, plaintiff was not willing to go ahead with the deal and notified defendant's representative accordingly, who accepted the condition and wrote a letter to this effect. However, the letter was never transmitted to the Plaintiff and its management approved the contract without the changes. As plaintiff clearly indicated its not willing to contract without certainty regarding the discount, making it an essential element of a contract. The court held, defendant's acceptance was definite and seasonable, as definite does not relate to the acceptance itself but to the process of acceptance. Plaintiff cannot bare the cost of loosing the defendant's representative's letter, which never get to the management. Hence, the revocation clause in defendant's form did not become part of the contract and plaintiff won the case.

255. Steiner v. Mobil Oil Co. 20 Cal.3d 90, 569 P.2d 751, 141 Cal.Rptr. 157 (1977) The court held: the "ultimate inquiry in determining whether sales contract has been formed is whether parties' conduct indicates consummated process of offer and acceptance and thus intent to contract or merely negotiations which have not yet, or have not ever, culminated in an agreement".

256. Baird/Weisberg p.1219

257. Wladis p. 1046

258. CBS, Inc v. Auburn Plastics, Inc. 67 A.D.2d 811, 413 N.Y.S.2d 50 (1979). The parties have been negotiating for the sale of molds. In September the defendant sent price quotations stating: "Unless accepted within 15 days from date, the proposal is not binding except at our option". As plaintiff replied with its purchase order only in December the court held, even though the seller's quotations were sufficiently detailed and specific so as to constitute offers, failure of plaintiff to reply in a timely manner resulted in no binding and enforceable contract.

259. Restatement § 41(1)

260. "A reply to an offer which purports to accept but is conditional on the offeror's assent to terms additional to or different from those offered is not an acceptance but is a counter-offer." Restatement § 59

261. Roto-Lith v. FP Barlett & Co., 297 F2d 497 (1962)

262. Dorton v Collins & Aikman Co., 453 F2d 1161 (1972)

263. Russ, Lee R.: What constitutes acceptance "expressly made conditional" converting it to rejection and counteroffer under UCC § 2-207(1), 22 A.L.R.4th 939 (Hereinafter: Russ)

264. In each of the more than 55 transactions between the parties, the contracts have been concluded orally, via telephone and subsequently acknowledged in writing by the seller. Each acknowledgment form supplied by C&A. contained a clause providing for arbitration in case of disputes. Dorton always received the acknowledgment forms prior to receiving the carpets, and despite the small print therein, took the delivery and paid the goods. C&A always submitted three forms, namely the 'Acknowledgement', 'Customer Acknowledgement' and 'Sales Contract'. The provision appearing on the face of each form stated that the acceptances (or orders) were "subject to all of the terms and conditions on the face and reverse side hereof, including arbitration" Moreover, the 'Acknowledgment 'stated that C&A's terms would become the basis of the contract between the parties "either (a) when signed and delivered by buyer to seller and accepted in writing by seller, or (b) at Seller's option, when buyer shall have given to seller specification of assortments, delivery dates, shipping instructions, or instructions to bill and hold as to all or any part of the merchandise herein described, or when buyer has received delivery of the whole or any part thereof, or when buyer has otherwise assented to the terms and conditions hereof." A similar clause would be found in the other two forms.

265. The ruling therein has been rejected in most of the decisions that followed. (Baird/Weisberg p.1221) It made even the drafters to react. After Roto-Lith failed to properly apply § 2-207 UCC on the battle of the forms, in order to guide the proper, intended application on the section the drafters reviewed, in 1966, Cmt 1. They made clear the section deals with two typical situations. One is when and agreement has been reached orally and later confirmed by writings of the parties and the other when the contract is concluded by an offer and acceptance. However, it is further specified, that a "frequent example of the second situation is the exchange of printed purchase order and acceptance (sometimes called "acknowledgement") forms. Because the forms are oriented to the thinking of respective drafting parties, the terms contained in them often do not correspond. Often the seller's form contains terms different from or additional to those set froth in the buyer's form. Nevertheless, the parties proceed with the transaction." In 1966 Cmt 7 had been also added. See Wladis p.1034-1035

266. Deusenberg & King: Sales and Bulk transfer § 3.06 (4) (1977) in Scott,/Kraus p. 292

267. Ibidem

268. Hunter § 4-22

269. Deusenberg & King: Sales and Bulk transfer § 3.06 (4) (1977) in Scott/ Kraus p. 292

270. Murphy, Edward J; Ayres, Ian; Speidel, Richard E.: Studies in Contract Law, 2003 (Hereinafter: Murphy at all) p. 194

271. Construction Aggregates Corp. v Hewitt-Robins Inc., 404 F.2d 505, 6 UCC Rep.Serv. 112 (1969). Plaintiff was the successful bidder on a contract for the construction of dikes, forming 'evaporation pans' to be used to extract minerals from the Dead Sea. It negotiated with Defendant, which would furnish the necessary engineering services and provide products of its own manufacture. In the course of contract conclusion among the numerous correspondences, the court determined that Plaintiff's letter setting forth the final agreement between the parties, which contained a clause the terms therein will not be considered accepted until Defendant approves all the conditions set forth, was an offer. However, Defendant communication added a clause that the acceptance was "'predicated on the following clarifications, additions or modifications to the order," including the substitute warranty clause which, the court held transferred the acceptance into a counter-offer and Plaintiff assented by seeking change only in payment term of counter-offer, raising no objection to other modifications. Defendant agreed to requested change and could reasonably have assumed that the single objection was acquiescence in other terms of counter-offer. Hence, when problems occurred in executing the contract, the court held, Plaintiff accepted the counter-offer which excluded any implied warranty of fitness.

272. Boese-Hilburn Co. v Dean Machinery Co., 616 S.W.2d 520 (1981); Daitom, Inc. v. Pennwalt Corp., 741 F.2d 1569 (1984)

273. Boese-Hilburn Co. v. Dean Machinery Co., 616 S.W.2d 520 (1981). "An acceptance which merely implied that it was "conditional" on the offeror' assent is insufficient to convert an acceptance into a counter-offer."

274. E.g. Steiner v. Mobil Oil Corp., 20 Cal.3d 90, 569 P.2d 751, 141 Cal.Rptr. 157 (1977). The court expressly acknowledged most courts have rejected Roto-Lith, and recognizing the superiority of the majority view, and reject defendant's attempt to advance the Roto-Lith interpretation.

275. E.g.Gardner Zemke Co. v Dunham Bush Inc. 115 N.M. 260, 850 P.2d 319 (1993). Whether there is an "expressly conditional" assent will depend on the commercial context of the transaction.

276. Boese-Hilburn Co.v. Dean Machinery Co., 616 S.W.2d 520 (1981). Plaintiff, an electrical subcontractor, as buyer of equipment, brought action against seller of Caterpillar diesel engines for damages alleging breach of an express warranty. After negotiations defendant prepared a "Quotation" which plaintiff accepted, expressly referring to it in its purchase order but adding "supplier warrants he will provide equipment to meet specifications." Defendant after "Accepted subject to above" affixed its signature.

In determining whether plaintiff's acceptance was "expressly made conditional" the court analyzed the approaches in Roto-Lith, Construction Aggregates and Dorton and concluded it does not have to follow either. It expressly rejected the Roto-Lith approach and ruled the "Purchase Order" failed to meet the criteria relied upon in the other two cases, noting it "is unnecessary for disposition of this case to decide which of the two approaches reflected thereby should be adopted". It held plaintiff's "Purchase Order" was a "definite and seasonable" acceptance not "expressly made conditional", and operated as an acceptance despite incorporating a term additional or different from the terms of the offer.

277. Ionics, Inc. v. Elmwood Sensors, Inc., 110 F.3d 184 (1997). The contract has been conclude for the sale of thermostats, which eventually caused fires, therefore buyers sued for breach of warranty and requesting damages. Plaintiff sent an initial offer to which defendant responded with its "Acknowledgment," which expressly stated the seller is only willing to sell on its own terms, even calling formally its communication a counter-offer. When defendant tried to invoke the counter-offer argument, which plaintiff accepted by accepting the goods and paying the price, namely to rely on Roto-Lith ruling, the court decided to overrule it. Stating: "We find the rule of Roto-Lith to be in conflict with the purposes of section 2-207 and, accordingly, we overrule Roto-Lith and find that subsection (3) governs the contract." When the terms in two sales forms are contradictory, each party is assumed to object to other party's conflicting clause, and thus mere acceptance of goods by buyer is insufficient to infer consent to seller's terms, and terms do not become part of contract; notification of objection has been given by the conflicting forms.

278. Dorton v. Collins & Aikman Co. 453 F2d 1161 (1972) See also Anderson

279. Most courts follow a narrow and literal interpretation of the clauses. Calamari/Perillo p. 99

280. Ibidem

281. Ibidem

282. All the forms submitted by Collins & Aikman contained the provision stating the acceptances (or orders) were "subject to all of the terms and conditions on the face and reverse side hereof, including arbitration". Nevertheless, the court ruled, the phrase "subject to" conditions the acceptance to some extent but does not qualifies an acceptance as "expressly conditional".

The following clauses have found not to be "expressly conditional": The purchase order contained a notice that "the seller agrees to all of the following terms and conditions" and a provision that the order form shall constitute the entire agreement of the parties (Mace Industries, Inc. v. Paddock Pool Equipment Co, Inc. 288 S.C. 65, 339 S.E.2d 527 (1986)); The phrase "expressly limited" is not sufficient to constitute an "expressly conditional" language (Reaction Molding Technologies Inc. v General Electric Co., 588 F.Supp. 1280 (1984))

The following clauses have been held "expressly conditional": "The terms set forth on the reverse side are the only ones upon which we will accept orders." (Ralph Shrader, Inc. v. Diamond International Corp., 833 F.2d 1210 (1987)); "Your order has been entered expressly subject to and conditioned on the understanding that our terms of sales stated on the front and reverse sides hereof and no other apply to this sale…" it has been held that "understanding" was an equivalent of "your assent" (Dresser Industries, Inc., v. Gradall Co. 702 F.Supp. 726 (1988))

283. Hawkland, William D.: Uniform Commercial Code Series § 2- 207:02 (Hereinafter: Hawkland)

In order to fit within the proviso the qualifying language "must be stated in such a place, manner and language that the offeror will understand in the commercial setting of the transaction that no acceptance has occurred ..." Hawkland, similary Calamary p. 99

284. Gardner Zemke Co. v Dunham Bush Inc. 115 N.M. 260, 850 P.2d 319 (1993) Also Leighton Industries, Inc. v. Callier Steel Pipe & Tube, Inc., 41 U.C.C. Rep. Serv. 2d 1128 (1991) (Language in the defendant's invoice which attempted to make the acceptance expressly conditional on the plaintiff's assent to the additional terms therein was insufficient to defeat its effect as an acceptance since the "expressly conditional" language was contained in small type on the back of the invoice which invoice was not even received by the plaintiff until three days after the goods were delivered). Reaction Molding Technologies Inc. v General Electric Co., 588 F.Supp. 1280 (1984). (A seller of plastic parts brought an action against the buyer for an alleged anticipatory breach. Though the buyer's acceptance contained statement that acceptance was expressly limited to conditions of purchase, the court held § 2-207 (1) UCC should be strictly construed. Hence, the court look beyond the words of the clause focusing on the actions of the parties and the whole commercial context of the transaction in order to determine whether the provision applies and concluded it does not. First, the clause states that acceptance is "expressly limited" rather than "expressly conditional." Furthermore, the clause was preprinted on a form contract, rather than typed or written into the contract. Hence, buyers' acceptance constituted an acceptance, despite altering terms, and a biding contract has thus been formed).

285. Hawkland

286. In Gardner Zemke Co. v Dunham Bush Inc. 115 N.M. 260, 850 P.2d 319 (1993). Plaintiff, a general contractor sued the manufacturer of air conditioning equipment alleging breach of contract. The Purchase Order submitted by plaintiff contained a one-year manufacturer's warranty provision and the requirement that the chillers comply with specifications attached to the Order. Defendant responded with its preprinted Acknowledgment containing extensive warranty disclaimers, a statement that the terms of the Acknowledgment controlled the parties' agreement, and a provision that silence will amount to an acceptance of the terms therein. The parties did not address the discrepancies in the forms and proceeded with the transaction. The District court found that the Acknowledgement have amount to a counter-offer, which plaintiff accepted by silence. However, the appellate court ruled differently, holding, that under the present factual situation the form submitted by defendant would indeed amount to a counter-offer under the common law but the result is different when § 2-207 UCC is applied. It relied on Cmt 2 stating while the comment applies broadly and envisions recognition of contracts formed under a variety of circumstances, it guides us to application of the concept of "commercial understanding" to the question of formation and taking into consideration the circumstances of the case, defendant's form did not amount to a counter-offer. It instructed the trial court to rule, the contract was formed under § 2-207(1) UCC and the conflicting warranty provisions in the parties' forms canceled each other thereby the warranty provisions of Article 2 remained in control. See also Cmt 2

287. See also e.g. Falcon Tankers, Inc. v. Litton Systems, Inc., 355 A.2d 898 (1976)

288. Contrary to the ruling in Gardner Zemke Co. v Dunham Bush Inc. 115 N.M. 260, 850 P.2d 319 (1993) the court in Air Master Sales Co. v Northbridge Park Co.-Op. Inc. 748 F.Supp. 1110 (1990) also looked at the broader commercial setting of the case and ruled the contrary. The manufacturer of windows sued the owner of apartment complex among other claims, alleging breach of contract. In the process of contract conclusion, the attorney of defendant drew up a letter, as a summary of previous negotiations and asked plaintiff to sign it. However, when confirming the content of the letter defendant added "This confirmation will be valid only when Air Master receives a Purchase Order from Northbridge Park Co-Op for the windows." The court concluded, even though § 2-207(1) UCC construed the counter-offer strictly, in the present case, the addition made by plaintiff clearly amounts to a counter-offer and as a result, parties did not conclude a valid contract. In a more recent case, Gage Prods. Co. v. Henkel Corp., 393 F.3d 629 (2004) the court held, defendant's purchase order was expressly conational stating: "Henkel will only pay charges listed on this po."

289. However, there is nothing in the drafting history that would suggest the offeree should use magic words or that expressly conditional provision should be construed narrowly. The purpose of the language "expressly made conditional" was solely to clarify that if an acceptance is conditional it will not constitute a "definite expression of acceptance" under § 2-207 (1) UCC. Wladis p. 1047

290. "… any additional matter contained in the confirmation or in the acceptance falls within subsection (2) and must be regarded as a proposal for an added term unless the acceptance is made conditional on the acceptance of the additional or different terms." See Cmt 2

291. Dean Murray differentiates a "genuine" counter-offer stated so clearly, that a reasonable offeror understand it as a counter-offer from a "fake" counter-offer. In real counter-offer subsequent performance will bind the offeror. If the response is not sufficiently clear to be a counter-offer it will amount to a definite acceptance, where the expressly conditional language is placed. A "fake" counter-offer would protect the offeree from the terms in the offeror's form but subsequent performance would not bind the offeror to the terms of the "fake" counter-offer. See Murray: Solutions p.1344

292. A counter-offer has been defined as being "an offer made by an offeree to his offeror relating to the same matter as the original offer and proposing a substitute bargain differing from that proposed by the original offer." See Restatement § 39 (1)

293. E.g. Koehring Co. v. Glowacki, 77 Wis.2d 497, 253 N.W.2d 64 (1977). Parties were negotiating on the sale of equipment and exchanged telegrams to that effect, where the purported buyer had offered to purchase on payment terms "FOB, our truck, your plant, loaded," and where purported seller had responded "as is, where is". As the objection has been raised before any performance the court held, there was no meeting of the minds and no contract since the second telegram diverged "radically."

294. E.g. Gage Prods. Co. v. Henkel Corp., 393 F.3d 629 (2004). Without reaching an agreement on price, defendant sent purchase order containing making it expressly conditional on plaintiff's assent. Upon receipt, plaintiff objected the price therein, but to avoid a plant shutdown and maintain the cash flow opted to sell the goods anyway. Defendant subsequently sent numerous purchase orders on some of which plaintiff on receipt corrected the prices. Upon return of the corrected purchase orders, defendant canceled them out and issued new once reflecting the corrections. Upon receipt of the new purchase orders, plaintiff shipped the products and issued invoices mirroring the prices in the revised purchase orders. The court held, defendant's purchase orders were expressly conditional and transferred the acceptance into a counter-offer which plaintiff accepted by shipping the goods and issuing the invoices with the same price terms.

295. Stephens, Corneill A.: Ending the Battle of the Forms: Problems with Solutions, 80 Ky. L.J. 815 (Hereinafter: Stephens)

296. Ibidem

297. Ibidem

298. This is a usual route courts follow, though not a uniform solution. Profs. White & Summer disagrees over the result. Prof. White finds the overall solution fair as the "neutral" Code gap fillers control the terms of the contract. But Prof. Summers disagrees, finding the solution contrary to the common law, which does recognize "conduct acceptances." Prof. Summers believes that the seller's clear counteroffer and the buyer's knowing receipt and acceptance of the goods should at least in some cases form a contract under § 2-207(1) UCC and the common law.

299. Thereby courts prevent frequent litigations over the meaning of an expressly conditional acceptance. Courts could find that differences in warranty, price or quantity are so substantial that their incorporation, even in the fine print, renders the acceptance "expressly conditional". (Baird/Weisberg p. 1245). If an acceptance is "expressly conditional" it amounts to a counter-offer, which cannot be accepted by silence. However, the interpretation leads back to the ruling of Roto-Lith, to the extensive interpretation of the wording "expressly conditional," which is not a desirable way to go.

300. The language is unsuitable taking into consideration that in § 2-207(1) UCC the 'mirror-image' rule is rejected and reading together § 2-204 UCC, § 2-206 UCC and § 2-207 UCC it is clear the contract can be formed even without agreement on all details of the contract. See Hunter

301. White/Summers

302. Murray: Chaos Revisited, p.8

303. § 2-104 (1) UCC defines merchants as persons who deals in goods or otherwise by his occupation holds himself out as having a knowledge or skill particular to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such a knowledge or skill. The meaning of "between merchants" is also defined in § 2-204 (3) UCC as any transaction where both parties have a knowledge or skill of merchants.

304. According to Dean Murray the, though § 2-207 UCC is principally directed to contracts "between merchants", the section nevertheless applies to both merchants and non-merchants. "While the statutory language itself is abundantly clear in this regard, it is possible to discover the mistaken notion that 2-207 has no application where both parties are not merchants." Murray: Chaos Revisited p. 7-8

305. § 2-204(2) UCC sets forth special rules when contracts are concluded between merchants. The provision assumes that transactions between professionals in a given field require special but clear rules, which may not apply to ordinary or inexperienced buyer and seller. The term merchant is defined and has roots in the "law merchant" concept of business professionals. Professional status may be based on the professional knowledge as to the goods or the business practice or both. However, even though the definition is liberally construed the provision applies only to those who also act in a particular transaction in a mercantile capacity. "A lawyer or bank president buying fishing tackle for his own use is not a merchant." See Cmt on § 2-104 UCC in Chomsky, Carol L; Kunz, Chritina L; Rusch, Linda J; Schlitz, Elizabeth R.: Selected Commercial Statutes, 2005 (Hereinafter: Chomsky at all) p. 58-59

306. An example for the different term is, where both forms have an arbitration provision but with a different content. For example one states the arbitration will be held in New York, while the other stipulates the arbitration will be held in Singapore.

307. An example for the additional terms would be, if one the acceptance contains a clause whereby all disputes will be decided by arbitration, whereas the other form is silent on the issue.

308. Vernon p. 450 However, White & Summers points onto the practical difficulty of the problem. If the forms do not diverge in price, quality, quality and delivery terms, but only differ in the usual unbargained terms concerning remedies, arbitration and the like will not be considered to be different in the sense of § 2-207(1) UCC. However, contract may be formed under § 2-207(1) UCC even if the acceptance substantially differs the offer. (White/ Summers) In case Idaho Power Co. v. Westinghouse Elec. Corp., 596 F.2d 924, 26 (1979) the court held there is an acceptance, even though the buyer's accepting form was the same as the seller's offering form, but the buyer stricken the seller's delivery date an inserted its own.

309. E.g. The court in Steiner v. Mobil Oil Co., 20 Cal.3d 90, 569 P.2d 751, 141 Cal.Rptr. 157 (1977) held the application of § 2-207 (2) UCC should not depend on the characterization of some term as additional or different respectively. Relying on cmt 3 and arguing further that the distinction is ambiguous ("Since an offeror's silence with respect to a particular issue may indicate intent to adopt the code's gap-filling provisions, even an acceptance term which at first glance appears to be plainly 'additional' is at least arguably 'different'") and serves no clear purpose ("If under subsection 2 the offeror still wishes to retain power over his offer, he can limit its acceptance, expressly to the terms of the offer under § 2-207(2a) UCC)"). See also Hawkland

310. The absence of "different" was an inadvertent drafting error. John L. Utz, More on the Battle of the Forms: The Treatment of "Different" Terms Under the Uniform Commercial Code, 16 UCC L.J. 103, 110-12 (1983) in Murray: Chaos Revisited p. 13.

311. "Any attempt to distinguish "different" from "additional" is a "hair splitting" or "metaphysical" exercise" (Baird /Weisberg) See also Boese-Hilburn Co. v. Dean Machinery Co., 616 S.W.2d 520 (1981); Steiner v. Mobil Oil Co., 20 Cal.3d 90, 569 P.2d 751, 141 Cal.Rptr. 157 (1977)

312. Dean Murray gives an illustration of the problem by making difference between express and implied terms in the acceptance. (1) Express terms in an offer negating UCC implied terms and express terms reserving such terms in the acceptance will be construed as "different" to which § 2-207 (2) UCC dies not apply, a disclaimer of warranty in the offer will be knocked out by an express reservation of that warranty in the acceptance, consequently the offeror is no longer the master of the offer. (2) An express term in the offer will not be "knocked out" by a contrary implied UCC term in the acceptance, which will be seen as an "additional" terms, and not "different" (though it is different). § 2-207(2b) UCC excises such an implied term as a material alteration of the offer and the offeror stays master of the offer. (3) Where the offer contains the implied UCC terms, an express disclaimer of that warranty in the acceptance will not become part of the contract. The contrary express term in the acceptance is incredibly characterized as an "additional" rather than "different" term, thereby activating § 2-207(2b) UCC. In this situation, the offeror is deemed to be the master of the offer via the implied term in the offer. See Murray: Chaos Revisited p. 18

313. Deusenberg & King: Sales and Bulk Transfer § 3.03 (1) (1977) in Scott, Robert E.; Kraus, Jody S.: Contract Law and Theory, LexisNexis, 2003 (Hereinafter: Scott/Kraus) p. 292. Idaho Power Co. v. Westinghouse Elec. Corp., 596 F.2d 924, 26 (1979) (Additional terms can become part of the contract automatically between merchants while different terms cannot).

314. Deusenberg & King: Sales and Bulk Transfer § 3.03 (1) (1977) in Scott,/Kraus p. 292

315. Baird/Weisberg. Some courts support the opinion. E.g. American Parts Co., Inc. v. American Arbitration Association, 8 Mich.App. 156, 154 N.W.2d 5 (1967) ("the omission was a deliberate choice by the experienced, careful draftsmen of the uniform commercial code"). An additional argument has been also raised, that in one of the early drafts of § 2- 207(2) UCC the phrase "and different" had been added. Its addition was also proposed on May, 1951 meeting discussing the Proposed Final Draft No. 2. However, the November, 1951 Final Text Edition and the 1952 Official Draft of § 2-207(2) UCC stayed without the word "different." See Stephens

316. Deusenberg & King: Sales and Bulk Transfer § 3.03 (1) (1977) in Scott,/Kraus p. 292

317. White/Summers

318. Ibidem

319. Murray: Chaos Revisited p. 14

320. American Parts Co., Inc. v. American Arbitration Association, 8 Mich.App. 156, 154 N.W.2d 5 (1967)

Prof. Summers argues the contrary, pointing onto Cmt 1 where the distinction has been made on contracts formed by confirmation forms and contracts established by an offer and acceptance form. See White/Summers

321. The approach is the most fair and reasonable and its application is supposed by the underlying rationale and purpose of § 2-207 UCC, which was intended to reform and replace the common law 'mirror-image' rule, while the other two approaches would lead to the application of the 'last-shot' rule. Summers/Hillman p. 512

322. Ibidem

323. Profs. White and Summers continue arguing which approach is better and authorized by the UCC. Prof. White argues the second approach gives the sender of the first form (usually the buyer) an unearned advantage. Prof. Summers does not agree that the "advantage" is entirely unearned. The recipient of the first form at least had an opportunity to object. Moreover, Prof. Summers believes that Prof. White's approach is relatively more unfair to the offeror than Prof. Summers' approach is to the offeree. According to Prof. Summers, offerors have more (even if only a little more) reason to expect that their clauses will control than offerees have. After all, when the offerees send their forms they will have already received a form from the offerors and offerees know well that forms of different parties rarely coincide. But even if the offeror's advantage is to some extent unearned, the text of § 2-207 UCC, according to Prof. Summers, authorizes such a result. § 2-207(1) UCC presupposes an outstanding offer and explicitly applies only to an acceptance (or confirmation). Thus the terms in the offer control exclusively except § 2-207 UCC provides otherwise, and it does not provide otherwise as to different terms and as to additional terms, it provides otherwise only insofar as these survive § 2-207(2) UCC. See White/Summers

324. E.g. Westinghouse Elec. Corp. v. Nielsons, Inc., 647 F. Supp. 896 (1986) ("subsection (2) covers "different" terms as well as "additional" terms"); (1981); Steiner v. Mobil Oil Corp., 569 P.2d 751, 759 (1977) (The applicability of subsection (2) should not hinge on a "characterization of the varying terms of an acceptance as 'additional' or 'different' "); Air Products & Chemicals., Inc. v. Fairbanks Morse, Inc., 58 Wis.2d 193, 206 N.W.2d 414 (1973) (The court acknowledged the disputed terms is a "different" term and proceeded to determine whether it materially altered the offer.)

325. E.g. Reaction Molding Technologies v. General Electric Co. 588 F.Supp. 1280 (1984) (§ 2-207(2) UCC does not apply to different, as opposed to additional, terms; thus, different terms would never become part of the contract under that provision); American Parts Co., Inc. v. American Arbitration Association, 8 Mich.App. 156, 154 N.W.2d 5 (1967) ("The policy of § 2--207 is that the parties should be able to enforce their agreement, whatever it is, despite discrepancies between the oral agreement and the confirmation (or between an offer and acceptance) if enforcement can be granted without requiring either party to be bound to a material term to which he has not agreed." Hence, a party cannot be expected to have assented to a "different" term).

326. White/Summers E.g. Daitom, Inc. v. Pennwalt Corp., 741 F.2d 1569 (1984). Plaintiff brought action against the seller of rotary vacuum drying machines alleging breach of warranties and negligent design and manufacture. Both parties used their pre-printed forms in the course of contract conclusion. The court held, seller's proposal as an offer which limited the statute of limitations to one-year as expressly permitted by § 2-725(1) UCC instead of the normal four year provision and buyer's purchase order as an acceptance containing a general statement reserving all rights and remedies available at law. The contract was formed when Plaintiff sent a purchase order constituting an acceptance. According to the court, the clause limiting the statute of limitation to one year was "different" from the seller's offer and after an indebt analyze of all three approaches, concluded: "The approaches other than the "knock-out" approach would be inequitable and unjust because they invited the very kind of treatment which the defendant attempted to provide" The court also rejected an inference from the lower court's opinion that the proper interpretation would treat the buyer's term as a material alteration of the offer under § 2-207(2b) UCC which would have excised it from the resulting contract, leaving the one-year limitation in the offer intact and changing the result in this case. See also Gardner-Zemke Co. v. Dunham Bush, Inc., 850 P.2d 319, 325-27 (1993); Idaho Power Company v. Westinghouse Electric Corporation, 596 F.2d 924 (1979); Lea Tai Textile Co., Ltd. v. Manning Fabrics, Inc., 411 F.Supp. 1404 (1975); Hartwig Farms, Inc. v. Pacific Gamble Robinson Company, 28 Wash.App. 539, 625 P.2d 171 (1981); S.C. Gray, Inc. v. Ford Motor Company, 92 Mich.App. 789, 286 N.W.2d 34 (1979).

According to Dean Murray the popularity of this position is predicated on the premise that recognition of "different" terms in § 2-207(2) UCC would prefer the terms of the offer in every case though the parties may pay little attention to who sends the first form. This is a legitimate concern. Murray: Chaos Revisited p. 18

327. Wladis, p. 1048

328. E.g.In Re Tunis Mfg. Corp., WL 20886 (N.Y.Sup.) (1972). Buyer ordered goods pursuant to written purchase orders which contained a provision that no change in the orders could be effected except by a writing signed by the buyer, and thereafter the seller shipped the goods and sent invoices containing an arbitration clause which the buyer refused to sign. The court held, the additional term in the invoices was ineffective because the purchase orders expressly limited acceptance to the terms of the offer under § 2-207(2a) UCC.

329. Murray: Chaos Revisited p. 28

330. Coastal Industries, Inc. v. Automatic Steam Products Corp. 654 F.2d 375 (1981)

331. There are also other "tests" that could be concurrent to the surprise and hardship test. E.g. the court in Kathenes v. Quick Chek Food Stores, 596 F.Supp. 713 (1984), ruled that a clause limiting consequential damages would not materially alter a contract. The court relied on the fact that Cmt 5 which states that a clause limiting a remedy in a reasonable manner is not a material alteration, thereby giving priority to the test of reasonableness over the test of surprise and hardship. However, the court in Dale R. Horning Co. v. Falconer Glass Indus., Inc., 730 F. Supp. 962 (1990) disagreed, holding the provision excluding consequential damages in fine print on defendant's standard form materially altered the agreement with plaintiff and did not become part of the contract. "The statutory language of § 2-207 speaking to material alteration focuses on two elements: surprise or hardship. The fact that a clause may be reasonable under the remedy provision of § 2-719 does not dictate the outcome of the contract formation analysis under § 2-207. The ultimate question remains whether such a limitation would surprise or work a hardship on the buyer; the issue of reasonableness is properly viewed as just one aspect of this material alteration analysis." Also in a more recent case Marvin Lumber & Cedar Co. v. PPG Indus., 401 F.3d 901 (2005) the court analyzed whether the exception referred in Cmt 5 (the test of reasonableness in § 2-719 UCC) is applicable or rather the test of surprise and hardship giving advantage to the later. It concluded that a damages limitation clause in acknowledgment form was material, because if effective it would have caused unreasonable surprise and hardship, with the element of surprise predicated on the location of the clause in fine print on the back of a standard form.

332. Among the rare definitions of hardship, one is given in the UPICC which dedicate the whole section to this institution. According to Art. 6.2.2. a hardship is "where the occurrence of events fundamentally alters the equilibrium of the contract either because the cost of a party's performance has increased or because the value of the performance a party receives has diminished." See also e.g. Dale R. Horning Co. v. Falconer Glass Indus., Inc., 730 F. Supp. 962 (1990) where hardship is referred to as economic hardship.

333. Cmt 4 refers to hardship or surprise. On contrary, the UPICC refers to hardship and surprise. After defining what is hardship it states which characteristics the events have to possess in order to allow the disadvantaged party to rely on hardship. In order to qualify an event as causing hardship, besides the economic consequences it cumulatively need to posses elements of surprise (See Art. 6.2.2. UPICC)

334. Murray: Chaos Revisited p. 9

335. Ibidem

336. Surprise can be either. See Union Carbide Corp. v. Oscar Mayer Foods Corp., 947 F.2d 1333, 1336 (1991)

337. Murray: Chaos Revisited p. 11, Hunter and also Dale R. Horning Co. v. Falconer Glass Indus., Inc., 730 F. Supp. 962 (1990)

338. Clauses that will normally amount to a material alterations are: "a clause negating such standard warranties as that of merchantability or fitness for a particular purpose in circumstances in which either warranty normally attaches; a clause requiring a guarantee of 90% or 100% deliveries in a case such as a contract by cannery, where the usage of the trade allows greater quantity; a clause reserving to the seller the power to cancel upon the buyer's failure to meet any invoice when due; a clause requiring that complaints be made in a time materially shorter than customary or reasonable" Cmt 4

339. § 2-302(1) UCC: If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.

Unconscionability as a term can be translated as unreasonable; shockingly unfair or unjust (See for the definition Merriam-Webster Online Dictionary at <http://www.m-w.com/dictionary/unconscionability>). Unconscionable contracts are of such as "no man in his common sense and not under a delusion would make the one hand, and no honest and fair man would accept it on the other hand, which are inequitable and unconscientious bargains…" (Lord Chancellor Hardwicke in case of Chesterfield (Earl of) v. Janssen, 2 Ves. Sen. 125, 28 Eng. Rep. 82 (1750) in Calamari/Perillo)

340. Murray: Chaos Revisited p. 11

341. However, under the UCC unconscionablity relates to individual clauses as well as the contract as such. (Williston). See also § 2-302 UCC

342. Scott/Kraus p. 457

343. Ibidem

344. Transamerica Oil Corp. v. Lynes, Inc., 723 F.2d 758 (1983). See for the facts note 134

345. "A clause setting forth and perhaps enlarging slightly upon the seller's exemption due to supervening causes beyond his control, merchant's excuse by failure of presupposed conditions, a clause fixing a reasonable time for complaints within customary limits, or in the case of a purchase for sub-sale, providing for inspection by the sub-purchaser; a clause providing for interest on overdue invoices of fixing the seller's standard credit terms where they are within the range of trade practice and do not limit any credit bargained for; a clause limiting the right of rejection for defects which fall within the customary trade tolerances for acceptance "with adjustment" or otherwise limiting remedy in a reasonable manner." Cmt 5

346. Product Components, Inc. v Regency Door and Hardware, Inc, 568 F.Supp. 651 (1983)

347. Baird/Weisberg p. 1246

348. Ibidem

349. What constitutes a course of dealing is also sometimes not clear. It has been argued; that the repeated sending of the same ignored standard forms containing variant terms will constitute a course of dealing. Even assuming an offeror would not be surprised to discover such a term in a seller's boilerplate response that had been sent many times in the past, it would be surprised to discover being bound by a term that was never acted upon in any past transactions. Course of dealing" requires a previous sequence of conduct between the parties, but a passive conduct of sending and receiving the same boilerplate should not be sufficient. Murray: Chaos Revisited p. 11

350. UCC § 1-201(3) defines "agreement" as distinguished from "contract" meaning the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade..."

351. Murray: Chaos Revisited p. 11

352. Hunter § 4-25

353. Oskey Gasoline and Oil Co. v. OKC Refining, Inc., 364 F.Supp. 1137 (1973)

354. Murray: Chaos Revisited p.12

355. For more details see Murray: Chaos Revisited p.11-12 See also Kathenes v. Quick Chek Food Stores, 596 F.Supp. 713 (1984)

356. E.g. Album Graphics, Inc. v. Beatrice Foods, Co., 87 Ill.App.3d 338, 408 N.E.2d 1041, 42 Ill.Dec. 332 (1980) Parties negotiated the sale of a special kind of glue, and reached an oral understanding. Defendant subsequently attempted to limit is liability, by placing disclaimer clauses on the invoices and labels of the containers the glue have been delivered. The court held, that neither the disclaimer of warranties, nor the limitation of remedies language could become part of the contract under § 2-207(2) UCC, being a material alteration.

357. E.g. Boese-Hilburn Co. v. Dean Machinery Co., 616 S.W.2d 520 (1981) (The warranty clause inserted by buyer in its purchase order in response to seller's price quotation document, which contained an express disclaimer of any warranty, materially altered seller's offer).

358. E.g. Product Components, Inc. v Regency Door and Hardware, Inc, 568 F.Supp. 651 (1983). Seller of polystyrene brought action against nonresident buyer to recover balance of contract price plaintiff relied on the forum selection clauses contained in its acknowledgment form and invoice. The court held, the clause materially altered the parties' contract, stating: "Subtle differences in courts, jurors and law among the states and considerations of litigation expense are factors the Court believes most merchants would consider important." Selection of distant forum with which buyer had no contacts merely by virtue of the seller's inclusion of clause in its forms could result in surprise and hardship to buyer. A single prior incident of buyer's president having signed seller's acknowledgment receipt and thereby apparently becoming bound by forum selection clause was not such prior course of dealing as to bind buyer to forum selection clause involved in dispute over subsequent transaction; prior course of dealing have required exclusive or numerous instances of particular conduct. Hence, the materially altering clause did not become part of the contract. Also General Instrument Corp. v.Tie Mfg, Inc., 517 F.Supp. 1231 (1981) (In a similar factual pattern, the court held, the clause materially altered the parties agreement, and did not become part of the contract). See the same ruling in Lively v. IJAM, Inc., 114 P.3d 487 (2005); Hugo Boss Fashions, Inc. v. Sam's European Tailoring, Inc., 742 N.Y.S.2d 1 (2002)

359. E.g. Marlene Industries Corp. v. Carnac Textiles, Inc. 45 N.Y.2d 327, 380 N.E.2d 239, 408 N.Y.S.2d 410 (1978) ("Inclusion of an arbitration agreement materially alters a contract for sale of goods and thus arbitration agreement does not become part of contract unless both parties explicitly agree to it"); Supak & Sons Mfg Co., Inc. v. Pervel Industries, Inc., 593 F.2d 135 (1979) (The arbitration clause was a per se material alteration of the contract and did not become part of it); Coastal Industries, Inc. v. Automatic Steam Products Corp. 654 F.2d 375 (1981) (As arbitration provision materially changes agreements, an unilateral insertion of arbitration clause constitutes per se material alteration.); Windsor Mill, Inc. v. Collins & Aikmann Corp. 25 Cal.App.3d 987, 101 Cal.Rptr. 347 (1972) (An arbitration provision is a material alteration.)

360. E.g. Galaxy International, Inc. v White Stores, Inc. 88 F.R.D. 311 (1980). After an oral understanding has been reached between the parties' brokers for the sale of beef, plaintiff sent a written confirmation of the sale to defendant, which it never signed. When defendant rejected the shipped beef for its very dark color plaintiff commenced an action for a breach of contract. Plaintiff being a Pennsylvania corporation, filed an action in the Western District of Pennsylvania against defendant, a Tennessee corporation, alleging, the choice of law clause in the confirmation from become part of the contract. The court held the contrary. Under Pennsylvania law, addition of choice of law term by way of notice of confirmation was a significant alteration, and because the confirmation was not signed or returned, such addition did not become part of contract.

361. E.g. Air Products and Chemicals, Inc. v. Fairbanks Morse, Inc., 58 Wis.2d 193, 206 N.W.2d 414, 424 (1973) ("We concluded that declaimer for consequential loss was sufficiently material to require express conversation between the parties over its inclusion or exclusion in the contract); Westinghouse Electric Corp. v. Nielsons, Inc., 647 F.Supp. 896, 900 (1986) (limitation of seller's liability for incidental and consequential damages is a material alteration)

362. E.g. Transamerica Oil Corp. v. Lynes, Inc., 723 F.2d 758 (1983) (" A limitation of remedy generally constitutes a material alteration."); Album Graphics, Inc. v. Beatrice Foods Co., 87 Ill.App.3d 338, 42 Ill.Dec. 332, 339, 408 N.E.2d 1041, 1048 (1980) ("A term disclaiming warranties, and we might add a term limiting remedies, is undoubtedly a terms that materially alters the contract".)

363. E.g. Hinson-Barr, Inc. v. Pinckard, 92 S.C. 267, 356 S.E.2d 115(1987) Parties entered into a verbal agreement for the sale of certain restaurant equipment. With the equipment an invoice was delivered, quoting a different price from the one earlier discussed. Buyer accepted the goods and did not contest the invoice price until more than 90 days after delivery. The court held, the buyer's failure to object to invoice price within 90 days did not render invoice price binding on buyer. The several thousand dollar difference in the price materially altered the contract and thus did not become part of oral contract between parties.

364. Tri-State Petroleum Corp. v. Saber Energy, Inc., 845 F.2d 575 (1988) Parties contracted for the purchase of gasoline. After an oral parties decided to lay down the terms in writing, plaintiff inserted a cancellation clause. Both the District and the Appellate courts held, the cancellation clause never became part of the contract, since it materially altered the oral agreement.

365. E.g. Mid-South Packers, Inc. v. Shoney's, Inc., 761 F.2d 1117 (1985) Meat packer brought action for breach of contract against purchaser of pork products. After an oral offer made by plaintiff the contract was formed by the purchase order of defendant and invoices issued by plaintiff incorporating additional terms relating to interest and reasonable collection costs, including attorney's fees. The court held, the additions made by the plaintiff become part of the contract. It reasoned the extensive course of dealing between the two parties clearly indicated to defendant that the invoices would follow its purchase orders and as it received several of the invoices in prior transactions, the interest and collection costs terms came as no surprise to it. Moreover, the purchase orders did not purport to contain all of the terms of the agreement he invoice, sent only one day following shipment, added a certainty and definiteness to the contract's terms that both parties expected and, presumably, desired. Finally, defendant had the right and the opportunity to prevent, in the proposed terms from becoming part of the contract.

366. Kathenes v. Quick Chek Food Stores, 596 F.Supp. 713 (1984) A soft drink bottler, which settled personal injury claim with a consumer who was struck in the eye by the soda bottle cap, sought contribution and indemnification from manufacturer of allegedly defective bottle cap. The parties concluded an oral contract but each shipment by the manufacturer was accompanied with the order acknowledgment form, containing a clause excluding consequential damages. The court relied on Cmt 5 and concluded, it was a commercially reasonable term and was not unconscionable and therefore it did not represent a material alteration of the parties' oral agreement. Hence, the clauses become part of the contract and plaintiff was not entitled to recover damages. However, there are opinions the decision was wrong (Vernon, David H.: Contracts: Theory and Practice, Mathew Brender, 1991(Hereinafter: Vernon) at 442, see also note 97)

367. E.g. Rengen, Inc, v. Valley Trout Farms, Inc. 104 Idaho 284, 658 P.2d 955 (1983) Fish food seller brought the action against buyer to recover on its open account for monies past due, finance charges, and attorney fees. The contract was concluded by defendant's purchase orders and plaintiff's shipments of the food (acceptance). However, the invoice accompanying the shipment provided an additional term on the late charge, which the court held, was not a material alteration of the contract and thus the term became part of the contract. The appellate court It invoked Cmt 5 and concluded: " the drafters of the code that this type of term, which adds a finance charge for past due accounts, is not a material alteration under the code". Nevertheless the situation was not clear-cut, as previously the trial court decided the alteration was material and on appeal Judge Blistin dissented with the view of the majority.

368. Greenberg, Rights and Remedies at 75 in Vernon p. 442. E.g. Transamerica Oil Co. v. Lynes, Inc. 723 F.2d 758 (1983) Parties negotiated orally over a sale of a production injection packer. Subsequently defendant attempted to exclude express and implied warranties by placing a clause to that effect on the reverse side of the invoices. The court held the invoices are sufficient to amount to an acceptance or a written confirmation. As the additions therein amounted for a proposal for contract modification, the further issue was, whether the disclaimer amounted for a material alteration, which was according to the court "a question of fact that must be determined in light of the facts of the case and the parties' expectations." The appellate court reversed and remanded the case, holding trade usages can prove the warranty exclusion clause was not a material alteration.

369. Tecumseh Int'l Corp v. City of Springfield, 70 Ill.App.3d 101, 388 N.E.2d 460, 26 Ill.Dec. 745 (1979) in the process of contract conclusion, defendant submitted the draft, but being unsuitable for plaintiff, in indicated some changes. However, only after plaintiff commenced perforce, the City Council passed an ordonance approving the deal, leaving out requested alterations. Plaintiff refused to sign the contract and requested damages. The court held, the ordonance amounted to a counter-offer, which has been expressly objected by plaintiff. Hence, plaintiff expressly retained control of its offer and was not compelled to do business on terms that it did not want. Thus the court concluded, no contract has been formed.

370. Alan Wood Steel Co. v. Capital Equipment Enterprises, Inc., 349 N.E.2d 627, (1976) (Although under the UCC the common-law requirement of "mirror image" rule has been rejected, the offeror may retain control of the offer and has a power equivalent to the offeree's power to expressly condition his acceptance).

371. Farnsworth, Allan E.: Contracts, 3ed, Aspen Law & Business, 1999 (Hereinafter: Farnsworth 1999) p.171. Under current interpretations of § 2-207 UCC, however, even an excruciatingly clear counter-offer would apparently require express assent by the offeror. (Murray: Chaos Revisited p. 28). However, this rule, that silence equals an acceptance is applicable only if both parties are merchants (Hunter § 4-25).

372. Cmt 3 also states minor changes will become part of the contract unless the offeror objects.

373. See Cmt 6 (in part), also Lea Tai Textile Co, Ltd v Manning Fabrics, Inc, 411 F.Supp. 1404 (1975) where parties exchange of forms that both contained an arbitration provision, but with a different content. One stipulated arbitration in New York and the other in Hong Kong. The court ruled, the clauses are in a hopeless conflict, therefore no contract to arbitrate was made, invoking § 2-207 (2c) UCC and Cmt 6.

374. E.g. Power Press Sales Co. v. MSI Battle Creek Stamping, 604 N.W.2d 772 (1999) Parties reached an oral agreement on the sale of a used power press, where the seller subsequently sent its invoice containing a materially altering indemnity provision. The court held the clause could have become part of the contract if parties' prior course of dealing would allow buyer's silence to be construed as acceptance of the term.

375. E.g. Pacamor Bearings, Inc. v. Molon Motors & Coil, Inc.,102 A.D.2d 355, 477 N.Y.S.2d 856 (1984) A buyer of ball bearings was not bound by term in plaintiff's sales order providing for a jurisdiction of courts in plaintiff's state, as the term materially altered the parties' agreement and was not explicitly agreed to by the defendant. Also Coastal Industries, Inc. v. Automatic Steam Products Corp. 654 F.2d 375 (1981) (Buyer's retention of invoices and receipt of pressing machines purchased did not constitute express acceptance of arbitration clause, being a material alteration, inserted in the invoice sent by the seller).

376. Wladis p. 1042. According to Wladis Cmt 2 supports the conclusion. The comment explains how additional terms in the acceptance can become part of the contract but misses any guidance how terms that are already in the offer and later neither mentioned and altered in the acceptance will become part of the contract, therefore leading to the conclusion those terms are already a constitutive part of the contract. The same: Baird/Weisberg p.1246, Murray: Chaos Revisited p.19, Rusch, Linda J.: Is the Saga of the Uniform Commercial Code Revision Over? A Brief Look at What NCCUSL Finally Approved, 6 Del. L. Rev. 41, 2003 (Hereinafter: Rush)

377. Wladis p. 1043. The conclusion is also supported by Cmt 7 which have been added in 1966 and which divorces contract formation from determining the terms of the contract.

378. Baird/Weisberg p.1247

379. The opinion of Prof. White (White/Summers)

380. According to the second approach, only additional terms are eligible to constitute a proposal for contract modification. Consenting the different terms, it is believed, there is an objection to them in advance under § 2-207 (2c) UCC. Or the other explanation is, different terms can never become part of the contract, because they are always material alterations (Daitom, Inc. v. Pennwalt Corp., 741 F.2d 1569 (1984)). Therefore, if the term is qualified as different, the terms of the offer will prevail ('fist-shot') whereas if the term is additional it will become a proposal for contract modification and part of the contract if the alteration is minor ('last-shot'). Materially altering additional terms will fall out under § 2-207(2) UCC ('knock-out')

381. Baird/Weisberg p.1246

382. White/Summers

383. There is even an opinion the § 2-207 (2) UCC has been created not for the battle of the forms but for confirmation letters. Baird/Weisberg p.1243

384. Dean Murray is not satisfied with the language of the subsection. He argues, the written confirmation does not operate as an acceptance, but confirms the already concluded valid and binding contract. Murray: Chaos Revisited p. 23

385. White/Summers

386. § 2-201 (1) UCC states: "Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties…"

387. Blodgett

388. E.g. Dorton v. Collins & Aikman Co. 453 F2d 1161 (1972); Murray: Chaos Revisited p. 23

§ 2-201 UCC itself recognizes a number of exceptions from the main rule. Firstly, the section refers only to contracts to a certain value (though only $500), secondly between merchants an oral contract remains valid if after its conclusion within a reasonable time a written confirmation is sent (2-201(2) UCC) or even if there is no written confirmation there is a valid contract if the parties performed (2-201(3c) UCC). For the battle of forms the most important is § 2-201 (2) UCC which reads: "Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received". There is even an opinion that in 1966 the last two sentences to Cmt 6 had been added with the purpose to clarify the relationship between § 2-207 UCC and § 2-201 (2) UCC. (Wladis p. 1035) Cmt 6 clarified what would be the terms of the contacts concluded by written confirmations: As a result the requirement that there be notice of objection which is found in § 2-207(2) UCC is satisfied and the conflicting terms will not become part of the contract. The contract than consist of the terms expressly agreed to, terms on which the confirmations agree, and terms supplied by the UCC.

389. Wladis p. 1035; Baird/Weisberg p.1223

390. Wladis p. 1035

391. Vernon p. 438

392. Greenberg; Rights and Remedies at 77 in Vernon p. 438

393. Karl Llewellyn was aware of the dual use of the word acceptance. As § 2-207 (1) UCC is written, the phrase "unless the acceptance is expressly made conditional on assent to the additional or different terms" put at the end of the subsection, could suggest the terms "acceptance" in the expressly conditional sentence refers either to "expression of acceptance" (a factual description, that is distinct from a "confirmation") or to "operates as an acceptance"(a legal conclusion that includes both the "expression of acceptance" and "confirmation"). However Cmt 2 makes clear, even though the comment as a whole relates to both, the provision in question applies only to acceptance and not to confirmations. ("Therefore any additional matter contained in the confirmation or acceptance falls within subsection 2 and must be regarded as proposal for added term unless the acceptance is made conditional on the acceptance on the additional or different terms." (emphasize added) Wladis p.1039

American Parts Co., Inc. v. American Arbitration Association, 8 Mich.App. 156, 154 N.W.2d 5 (1967) In the instant case plaintiff seek a stay of arbitration proceeding pursuant to the arbitration provision of alleged contracts on printed forms called 'confirmation of order,' where defendant added an arbitration clause, and provided that the entire form would become controlling if the "buyer accepts delivery of all or any part of the goods herein described." The court ruled, when the conditional assent language was in written confirmation it has to be regarded as additional material term that fall under § 2-207(2b) UCC.

394. Air Products & Chemicals., Inc. v. Fairbanks Morse, Inc., 58 Wis.2d 193, 206 N.W.2d 414 (1973)

395. Calumet Cheese Co., Inc. v. Chas. Pfizer & Co., Inc. 25 Wis.2d 55, 130 N.W.2d 290 (1964). Plaintiff brought an action for breach of on an implied warranty and negligence in contract for additives. The parties concluded the contract via telephone, but defendant tried to disclaim all liability, in a small print on the back of each invoice and order acknowledgment form. The court held the defendant's attempt to be ineffective, the liability disclaimer being a material alteration fell out and the defendant was liable for the breach of implied warranty.

396. American Parts Co., Inc. v. American Arbitration Association, 8 Mich.App. 156, 154 N.W.2d 5 (1967) After the oral contract and defendant sent a confirmation letter containing an arbitration clause, which the plaintiff never assented to. Hence, plaintiff sought a stay of the arbitral proceeding commenced by the defendant, whereas, defendant moved for summary judgment. In denying summary judgment the court assumed that under § 2-207(1) UCC a confirming form could constitute an "acceptance" even where there has already been an oral offer and acceptance. As corollary, certain additional terms in the confirmation may become (retroactively) a part of the original contract by virtue of § 2-207(2) UCC. See also note 159

397. White/Summers

398. Hunter § 7:6

399. Anderson

400. § 2-202 UCC: " Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement…." A good illustration for "final expression of the agreement" is the case Transamerica Oil Corp. v. Lynes, Inc., 723 F.2d 758 (1983). Parties reached an oral understanding for the sale of production injection packers, but when they failed to perform properly buyer (plaintiff) filed an action for damages. Seller claimed it is not liable due to warranty declaimers printed on the reverse side of each invoice, which were sent along with shipments, while buyer claimed the advertisement in trade journals that packers would work properly in open holes seller's oral statements create an express warranty. As the buyer's contention contradicted, the court, in order to determine if parole evidence is admissible, needed to establish whether parties intended the invoices to be a final expression of their agreement on the terms of the sale. Relying on the wording used in the invoices, it decided, the invoices solely amounted to a written confirmation of the oral agreement and were not an expression of the parties' final agreement.

401. See § 2-202 UCC

402. Hunter § 4-16

403. Tecumseh Int'l Corp v. City of Springfield, 70 Ill.App.3d 101, 388 N.E.2d 460, 26 Ill.Dec. 745 (1979) In the instant case the court rejected defendant's argument that the contract has been formed by conduct of the parties (§ 2-207(3) UCC) despite performance of the plaintiff. The court held: "Section 2-207(3) is not applicable in the instant case since that section requires that conduct by both parties recognize the existence of a contract". Even though plaintiff commenced performance, as soon as it found out the final agreement had not been made on the terms it contemplated, it made an objection to the content of the contract and immediately stopped delivery of the goods.

404. White/Summers; § 2-204 (1) UCC: "A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract".

405. A question has arisen concerning the proper interpretation of the language in § 2-207(3) UCC, which deals with "supplementary terms incorporated under any other provision of this Act." Should this language be limited to "supplementary terms" such as implied warranties, or should it be read more expansively to include any provision of the Code, e.g., trade usage or prior course of dealing? Though the case law is scant, the current interpretation favors an expansive reading of this language (Murray: Chaos Revisited) E.g. the court in Gord Industrial Plastics, Inc. v. Aubrey Manufacturing, Inc. 103 Ill.App.3d 380 (1982) ruled: "Among the terms with which the Uniform Commercial Code may supplement a contract are the parties' course of dealings and the usage of trade".

406. See also Cmt 7 ("In many cases, as where goods are shipped, accepted and paid for before any dispute arises, there is no question whether a contract has been made. In such cases, where the writings of the parties do not establish a contract, it is not necessary to determine which act or document constituted the offer and which the acceptance. See § 2-204. The only question is what terms are included in the contract, and subsection (3) furnishes the governing rule")

407. § 2-207 UCC was not drafted to remedy the battle of forms problem, Karl Llewellyn, when explaining the daft it made to the NCCUSL Commissioners he described the section as covering both the qualified acceptance and written confirmations but did not mention the battle of the forms. Indeed, not until 1966 were the Official Comments reviewed to mention the battle of the forms. However, drafters were aware of the problem from the begging and intended to include the issue into the scope of § 2-207 UCC See Wladis p. 1040-1041

408. Writing on legislative history of § 2-207 UCC Prof. Wladis concluded the section deals with three kinds of situation. First is the qualified acceptance problem, second is when written confirmations contain additional terms and the third he believes is the battle of the forms. Wladis p. 1035

409. Wladis p. 1035-1036; By a supporting opinion, the battle of the forms concerns contracts formed by conduct and not negotiation. See Kalevitch, Lawrence: Realtionalism & Consent: Revising U.C.C. § 2-207, 5 U. Miami Bus. L.J. 157, 1995 (Hereinafter: Kalevitch)

410. The "model" Prof. Wladis offers is unusual, perhaps not very clear and rarely, if ever followed by courts, whereby § 2-207(2) UCC can supply supplementary terms to the contract formed under § 2-207 (3) UCC. ("The purpose of § 2-207 (2) UCC is to permit reasonable clauses to become part of the contract, between merchants unless objected to. This reasoning applies to any contract formed under § 2-207 UCC" See Wladis 1048). The setting would be the following: parties' exchange their writings containing differing terms therein nevertheless they later performed invoking the application of § 2-207(3) UCC which invalidates the conflicting clauses but in supplementary terms for the now missing, include terms supplied by § 2-207 (2) UCC. Which term can it be, is hardly imaginable. The conflicting terms are now missing and all the others in the parties forms are already part of the contract. Interestingly, a provision to this effect in incorporated in Cmt 6, which is though applicable to § 2-207(2) UCC. See also Cmt 6

411. "Many of the difficulties encountered in applying section 2-207 result from the drafter's failure to explain clearly how section 2-207 was to apply to the battle of the forms." Wladis p. 1041

412. Stephens

413. E.g. Falcon Tankers, Inc. v. Litton Systems, Inc., 355 A.2d 898 (1976) ("If offeror does not specifically agree to offeree's different or additional terms on acceptance of offer, expressly made conditional on assent to such additional or different terms, contract may still come into existence through some performance by parties sufficient to recognize existence of contract"); Gord Indus. Plastics, Inc. v. Aubrey Mfg., Inc., 431 N.E.2d 445 (1982) (Where seller's counteroffer was not accepted by the buyer the court held there is nevertheless a contract, based on § 2-207(3) UCC). See also Dorton v. Collins & Aikman Co. 453 F2d 1161 (1972)

414. "The drafting history reveals nothing about the counter-offer riddle" See Murray: Solutions Also E.g. Construction Aggregates Corp. v Hewitt-Robins Inc., 404 F.2d 505, 6 UCC Rep.Serv. 112 (1969) The court expressly rejected a possibility of application of § 2-207(3) UCC it stated that there is no place to create a contract by the operation of law, when parties themselves created it. The plaintiff accepted the terms of the counter-offer objecting only to payment changes and leaving without any objection the other modifications, among others the liability limitation terms.

415. Scott/Kraus p. 292

416. Hawkland, White/Summers

417. White/Summers

418. Alliance Wall Corp.v. Ampat Midwest Corp., 17 Ohio App.3d 59, 477 N.E.2d 1206 (1984) Parties failed to reach an agreement in their correspondence on shipment date and it prevented formation of binding contract under 2- 207(1) UCC, as the divergence was significant in a dickered term (though there was no expressly conditional language). However, when goods were shipped and received, and price was partially paid, the conduct by both parties sufficient to establish contract.

419. E.g. In case Bosway Tube & Steel Corp. v. McKay Machine Co. 65 Mich.App. 426, 237 N.W.2d 488 (1976) The only evidence of a contract in the were a detailed offer to sell from defendant, a bare acceptance by plaintiff which conflicted with the offer, and the conduct of the parties in carrying out the contract. The court held, plaintiff's acceptance created a contract despite containing additions and than turned to § 2--207(3) UCC holding the contract is established by the conduct of the parties and the contract terms are those upon which the writings agree the missing terms supplied by the UCC. Prof. White agrees with the result but finds technically incorrect to use § 2-207(3) UCC where the court has already found a valid contract under § 2-207(1) UCC. See also Westinghouse Elec. Corp. v. Nielsons, Inc., 647 F.Supp. 896 (1986) (dealing with different terms, finding a contract under § 2-207(1) UCC and proceeding to apply § 2-207(2) UCC and § 2-207(3) UCC).

420. Hunter § 4-16

421. Murray, John E.: The Revision of Article 2: Romancing the Prism, 35 Wm. & Mary L. Rev. 1447 (Summer 1994) (Hereinafter: Murray: Revision)

422. Farnsworth, Allan E.: Contracts, 262 (1990) in del Pilar Perales Viscasillas: Battle of the Forms

423. Brown, Caroline: Restoring Peace in the Battle of the Forms: A framework for making Uniform Commercial Code Section 2-207 work, 69 N.C. L. Rev. 893, 902 (1991) (Hereinafter: Brown); "The UCC provision has proved to be an unadulterated chaos" Calamari/Perillo p. 98

424. White/Summers

425. del Pilar Perales Viscasillas: Battle of Forms; Calamari/Perillo p. 103

426. Baird/Weisberg p.1248

427. Murray: Solutions

428.

428 Keating, Daniel: Exploring the Battle of the Forms in Action, 98 Mich. L. Rev. 2678, 2000 (Hereinafter: Keating)

429. Adopting formalistic approaches would spell the end of the purposes of § 2-207 UCC and would be a great step back in the evolution of contract law whereas the aim should be a progress. Murray: Solutions

430. Dean Murray is of the opinion the standard terms of Article 2 as balanced and fair, some protect the buyer and some the seller. When a party performs after receiving the other standard form its blanket assent relates only those terms in a standard form that match the "specific normative assumptions of Article 2". These standard terms include "express and implied warranties and all judicial remedies to protect the fundamental expectation interests of the parties." But the blanket assent dos not incorporate an assent to the e.g. seller's disclaimer of Code warranties. The disclaimer remains outside the agreement. See Meiklejohn, Alexander M.: Castles in the Air: Blanket Assent and the Revision of Article 2, 51 Wash. & Lee L. Rev. 599, 1994 (Hereinafter: Meiklejohn)

431. Murray: Solutions p.1385; For the possible drawbacks of Dean Murray's solution see Levin, Daniel A.; Blumberg Rubert, Ellen: Beyond UCC Section 2-207: Should Professor Murray's Proposed Revisions be Adopted? 11 J.L. & Com. 175, 1992 (Hereinafter: Levin/Blumberg Rubert)

432. "Our point of difference with Dean Murray is not that the inquiry he thinks courts should engage in is not necessarily the wrong one, but rather that it is a necessarily imprecise one." Baird/Weisberg p. 1219

433. A party can erroneously invoke the discrepancy between the forms and back out from the deal, that it could cause an endless battle of the forms and that the fist submitting party will be bound to the terms of the offeree without being aware of the content in the boilerplate.

434. Baird/Weisberg

435. Baird/Weisberg p.1223

436. Goldberg, Victor P.: The "Battle of the Forms": Fairness, Efficiency and the Best-Shot Rule, 76 Or. L. Rev. 155, 1997 (Hereinafter: Goldberg)

437. See Preliminary Report in Murray: Revision, note 13

438. Initially drafts sought to update nearly all aspects of Art. 2. However, NCCUSL did not want to destroy the present uniformity of Art. 2 by adopting amendments that some jurisdictions might reject, due to a potential opposition from consumer and business groups. See Maggs

439. Cmt 1 on § 2-207 NUCC

440. Chomsky at all p.71

441. These include the change of the term "writing" to "record" throughout the article, a redefinition of the terms" sign" and "conspicuous", and definitions and use of the new terms "electronic," "electronic agent," and "electronic record."

442. § 2-103(m) NUCC: "A record means that is inscribed on a tangible medium or that is stored in an eclectic or other medium and is retrievable in perceivable form". Or in other words, a record is either a writing or a retrievable message in a computer's memory, a computer disc or alike. Calamari/Perillo

443. Rusch

444. Cmt 1 on § 2-204 NUCC

445. Cmt 2 on § 2-206 NUCC

446. Rusch

447. Cmt 3 on § 2-206 NUCC. The commentators even acknowledge the result given in § 2-206(3) NUCC is consistent with a final sentence of § 2-207(1) UCC

448. Cmt 3 on § 2-206 NUCC

449. See Cmt 2 on 2-207 NUCC

450. Statutes ensure uniformity among the states in a way that judicial precedents cannot reasonably be expected to do. The law would remain unsettled in jurisdictions that have not addressed the issue. Moreover although judicial precedents can clarify ambiguities, they cannot make necessary substantive changes to the law. Maggs

451. When forms are exchanged before or during performance, the result will differ from the prior § 2-207and the common law it gives no preference to either the first or the last form. See Cmt 2 on § 2-207 NUCC

452. Cmt 5 on § 2-207 NUCC

453. The terms of the contract will be comprised of terms agreed to orally as well as the terms in the confirmations that are consistent. Nevertheless it have to be paid attention whether the form is intended to replace or confirm the oral contract, as § 2-207 NUCC deals only with contract confirmations and contract modifications are death with in § 2-209 NUCC. See Cmt 2 on § 2-207 NUCC

454. Cmt 3 on § 2-202 NUCC

455. Cmt 2 on § 2-202 NUCC

456. Cmt 3 on § 2-207 NUCC talks about essential terms and immaterial, and does not contrast material to immaterial. If there is any difference in materiality of the terms, Cmt 3 instructs, that only those that are really important, crucial for the bargain itself (e.g. terms related to the goods, price, quality and quantity) will fail the contract formation.

457. Rusch

458. Cmt 3 on § 2-207 NUCC

459. Cmt 4 on § 2-207 NUCC "If the members of a trade, or if the contracting parties, expect to be bound by a term that appears in the record of only one of the contracting parties, that term is part of the agreement. However, repeated use of a particular term or repeated failure to object to a term on another's record is not normally sufficient in itself to establish a course of performance, a course of dealing or a trade usage."

460. E.g. If a buyer sent a purchase order with technical specifications and the seller responded with a record stating "Thank you for your order. We will fill it promptly. Note that we do not make deliveries after 3:00 p.m. on Fridays." it might be reasonable to conclude that both parties agreed to the technical specifications. See Cmt 3 on § 2-207 NUCC

461. Calamari/Perillo

462. In a rare case the terms in the records of both parties might not become part of the contract. This could be the case, for example, when the parties contemplated an agreement to a single negotiated record, and each party submitted to the other party similar proposals and then commenced performance, but the parties never reached a negotiated agreement because of the differences over crucial terms. See Cmt 3 on § 2-207 NUCC

463. Rush

464. A very broad provision leaves the courts wide discretion in determining whether the parties have reached an agreement to incorporate the term standing outside of their writings.

465. Murray: Solutions p.1308

466. See Gras: Standaardcontracten, een Rechtssociologisch Studie (Deveter 1979), a statistical analysis of the use of general terms and conditions in trade in an illustrative country, the Netherlands See p. 171 Kritzer, Albert H. ed: Guide to practical application of the UN Convention for the International Sale of Goods(CISG), Deventer, Boston, 1994 (Hereinafter: Kritzer)

467. The "Corporate Counsel's Perspective of the 'Battle of the Forms'" by Grant G. Murray, Vice-President, General Counsel & Secretary, IBM Canada Ltd. Toronto. It was prepared for a Conference on the Battle of the Forms reported in 4 Canadian Bus. L.J. 261-296 (1980) in Kritzer p. 178c - 178f

468. Data Processing and General Systems Divisions-126 forms; Information Records Division-10 forms; Office Products Division-19 forms; Datacenter Services Division-50 forms. According to the Mr. Murray contract administration is a very complex business. That is where the reason for all these different kinds of forms lies. The use of an appropriate form for every single transaction makes the procedures as straightforward as possible.

469. In the said division, at the time the report was made IBM had 500 contracts of adhesion, signed by the customer and 25 that were potentially covered by the' last-shot' approach. See Kritzer p. 178d

470. To illustrate, when the report was made there were only about 50 contracts that have been individually negotiated and around 27 000 regular orders from which 4000 worth over 3000 dollars. See Kritzer p. 178e

471. Merchants see no value in giving up the speed, efficiency and cost saving which prompted their conversion to EDI in order to facilitate an electronic version of battle of the forms. See McCarthy, Thomas J.: An Introduction: the Commercial Irrelevancy of the "Battle of the Forms," 49 Bus. Law. 1019 (1994)(Hereinafter: McCarthy) p. 1025

472. Murray: Revision p.1454

473. Paul J. Bonanto, a Corporate Counsel for Du Pont's polymer business: "as you may recall, some time ago business decided to eliminate order acknowledgement forms to save money-they were advised of the somewhat weaker battle of the forms position and accepted it. In part, they concluded that these issues are death out on a business basis anyway." See McCarthy p. 1027

474. Ibidem and Kritzer p. 178f

475. Farnsworth

476. van Alstine

477. The analyzed sample of cases is comprised of all cases involving the battle of the forms that were available in the CISG Online Database administered by Pace Law School (www.cisg.law.pace.edu) concluding with November 2006. However, whether the sample reflects the reality, cannot be determined. Rulings on the CISG are national state court decisions and percentage of their availability is not known. On the other hand, even a number of accessible lacks a substantial amount of facts and sometimes the court's reasoning.

478. Leete, Burt A: Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal, 1992 (Hereinafter: Leete)

479. To illustrate the difference: Art. 19(3) CISG talks about clauses that relate to price, payment, quality and quantity, place and time of delivery etc., while Cmt 4 gives some real life and very specific examples like the following: "a clause requiring a guaranty of 90% or 100% deliveries in a case such as a contract by cannery, where the usage of the trade allows greater quantity leeways".

480. Dorton v. Collins & Aikman Co. 453 F2d 1161 (1972)

481. Contract formation with additional or different terms is under § 2-206(3) UCC and the terms of the contract under § 2-207 UCC.

482. See § 2-207 NUCC Note the provision is not intended to deal only with the battle of the forms. See Cmt 1 on § 2-207 NUCC

483. See Art. 2:104 PECL (Terms Not Individually Negotiated).

484. For example: The seller's standard form contained an arbitration clause, and the buyer's did not. Applying the 'knock- out' rule, the seller's arbitration clause will be invalid and the underlying statutory rules will be applied for determining which court will hear the case.

485. See § 2-207(b) NUCC

486. On the § 2-207 UCC, that is in force today, Dean Murray writes: "Notwithstanding the radical departure from the common law mirror image rule, Llewellyn's concept was relatively simple. It is unlikely that he recognized the severe problems that courts found in applying the relatively simple concept. " he had absolute confidence in the judicial creation of a magnificent edifice of fidelity to factual bargains with the skeletal foundation of 2-207 as the driving force. Had he lived to witness the actual judicial development, is disappointment would have been profound." Murray: Solutions, p. 1326

487. See I.4.(Legislative history of Art. 19 CISG)

488. Art. 1:101 (1) of PECL and the Preamble of UPICC

489. Art. 1:101 (3a) of PECL and the Preamble of UPICC

490. Lando p. 382

491. Art. 1: 101(4) PECL and the Preamble of UPICC

492. See under UPICC Art. 2.1.2 (Definition of offer); Art. 2.1.6. (Mode of Acceptance); Art. 2.1.11 (Modified Acceptance); under PECL (Art. 2:201(Offer); Art. 2:204 (Acceptance); Art. 2:208 (Modified Acceptance)

493. Art. 2.1.22 UPICC; Art. 2:209 PECL

494. Art. 2.1.19 (Contracting under standard terms); Art. 2.1.20 (Surprising terms); Art. 2.1.21 (Conflict between standard terms and non-standard terms); Art. 2:104 PECL (Terms Not Individually Negotiated)


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