The issue of how to handle the battle of the forms issue when exchanging estimates, proposals, and POs is actually complex although the solution is somewhat straightforward. It is also commonly dealt with incorrectly by businesses. Companies can create their own forms of POs including applicable T&Cs. However, this only partly addresses the issue given that companies are at times the seller receiving the PO after providing their estimate/quotation, that the terms of the other party’s offer or acceptance are also relevant, and that each exchange can become a counter-offer. The main, applicable rule, is as follows:
U.C.C. § 2-207 provides:
(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 a 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.
This code often makes peoples’ heads spin with legal jargon. Other sections of the UCC code and case law can also be relevant given the applicable situation. Thatsaid, the main take away from this code section is to control the terms of the offer whether that be by submitting a PO that is an offer to purchase, an estimate or quotation that is an offer to sell, or in the terms of accepting a counter-offer made through a PO or other response that is conditioned upon assent to additional or different terms.
Companies can handle this issue with a two-fold approach. In situations where a company is the buyer, the company can submit its own version of a PO with accompanying T&Cs. In situations where a company is the seller, the “estimate” can be positioned as an “offer to sell” that also includes terms and conditions which include stating it is an offer to sell expressly conditioned on the buyer’s acceptance of the terms and conditions set forth in the estimate. All of the terms and conditions can, among other things, specify that no additional terms or conditions shall be binding upon on the company unless agreed to in writing signed by the company.
When someone responds to an estimate with a PO, the company can send an email acknowledging receipt of the PO and accepting it conditioned upon the buyer’s assent that any additional or different terms in buyer’s PO are superseded by the terms and conditions in the company’s estimate. The issue here to be aware of, however, is that any expressly conflicting terms in each party’s terms and conditions may be “knocked out” and case and statutory law will fill in the gaps depending upon the circumstances at hand. Still, the point is to control the terms of the offer, in whatever form that it occurs, and to guard against a situation where a “counter offer” seeks to modify the additional offer terms.
The take away is that companies need to be careful how they offer and accept goods in the market place. Carefully worded T&Cs on estimates, proposals and POs addressing the applicable UCC codes and case law can save a lot of headaches down the road.