What is UCC 2-207?
How can this legal provision be explained in simple terms?
What are the essential elements you should know!
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UCC 2-207 Explained
UCC 2-207 refers to a provision of the Uniform Commercial Code titled “Additional Terms in Acceptance or Confirmation”.
This article was adopted to set aside two common law rules:
- Mirror image rule
- Last shot doctrine
Let’s look at these two rules to understand them better.
UCC 2-207 reads as follows:
(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.
Mirror Image Rule
A contract is formed when the “mirror image rule” applies.
In other words, if the acceptance of the offer is the “mirror” of the offer made, you have a legally binding contract.
Should the offeree accept the offer with modifications (acceptance is not the mirror of the offer), legally speaking that means that the initial offer was rejected and a counter-offer was made.
Battle of The Forms
The “last shot” rule is a common law rule that deals with the classic battle of the forms situation.
Under this rule, a contract is not formed until and unless the “acceptance” matches the “offer”.
In this case, if each party submits their own terms and conditions during the negotiation of a contract, the party who submitted its general terms and conditions or boilerplate terms last before the final acceptance is the winner.
In other words, the terms and conditions applicable to the contract are those of the part that submitted the last “offer” accepted by the other.
If the buyer made an offer in its on standard terms and conditions, the seller rejects it and makes a counter-offer by replacing the buyer’s standard terms with its own standard terms, then the seller’s terms will prevail if the counter-offer is accepted.
In many common law countries, the last-shot rule has either been abandoned or significantly limited in scope due to its inherent buys to favor the “last shot” as opposed to the “intention” of the parties.
UCC 207 Example
The objective of 2-207 is to provide contracting parties with more reasonable expectations as to the contract they’ve entered into when the terms of their “acceptance” conflicts or additional terms were included.
Imagine the buyer submits a purchase order to the seller who agrees to sell products.
When the seller agrees to the terms, the parties assume a contract is formed and proceed to execute their obligations.
The seller ships the goods with an acknowledgment form containing terms and conditions that are different than the buyer’s purchase order.
If the goods sold do not meet specifications, what terms and conditions will apply to the contract?
Will the terms and conditions associated to the buyer’s purchase order apply or the seller’s boilerplate terms and conditions with the acknowledgment of receipt of the goods?
Under common law, if there is a variance, the seller’s acknowledgment form will be considered as a counter-offer accepted by the buyer.
As a result, the seller’s boilerplate terms and conditions would prevail.
With this mechanism, the law favors the sellers who are considered to have made a counter-offer accepted by the buyer.
U.C.C. 2207 attempted to make the game a little more fair for the buyers.
To better illustrate the way a contract is formed, there’s “The Battle of the Forms” flow chart under 2-207 UCC published by Keith A. Rowley in 2004 illustrated below:
The UCC 2-207 flow chart provides a nice overview of the logic that you must consider in resolving the battle of the forms.
With the application of 207/2 of UCC, a contract can be formed with the exchange of non-matching forms.
Essentially UCC 207 reforms the common law mirror image rule and rejects the undue advantage given to the party calling the last shot.
The first paragraph of UCC 2207 states that the mirror image rule does not apply to prevent contracts to be formed.
The second paragraph of UCC Section 2-207 clarifies what terms and conditions apply when a contract is formed based on non-matching terms or forms.
The official comments on this paragraph provide some support that it must address situations when “additional” and “different” terms are part of the contract but the courts have refused to interpret it as such.
If the terms are “different” they are knocked out of the contract and the UCC default provisions will govern.
Ultimately, based on UCC 2 207 paragraph 3, the conduct of the parties recognizing that there was a contract is sufficient for the court to accept the formation of a contract even though what’s in writing may not formally establish the same thing.
How is UCC 2-207 legally applied?
Let’s look at a summary of our findings.
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