1. 1 George Mason School of Law Contracts I G.Offer and Acceptance II F.H. Buckley fbuckley@gmu.edu

2. Today  Revocation: Unilateral Contracts  Counter-offers  Battle of the Forms  UCC 2-207 2

3. Revocation: Unilateral Contracts  The Brooklyn Bridge example on p. 233. Offeror terminates when offeree is halfway across the bridge. 3

4. Revocation: Unilateral Contracts  Restatement § 36(1). An offeree’s power of acceptance may be terminated by (a) rejection or counter-offer by the offeree. 4

5. Revocation: Unilateral Contracts  Restatement § 45. Option Contract Created by Part Performance or Tender. (1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it. 5

6. Revocation: Unilateral Contracts  Restatement § 45. Option Contract Created by Part Performance or Tender. (1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it.  What if the offeree changes his mind half-way across the bridge? 6

7. Acceptance vs. Counter-offer 7

8.  Wholesaler offeror offers retailer offeree “a dozen 22 inch clay pots for $300.” Offeree emails back “Great. I’ll take three dozen.”  Is there a contract? 8

9. Acceptance vs. Counter-offer  §39. COUNTER-OFFERS. (1) A counter-offer is an offer made by an offeree to his offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer. (2) An offeree's power of acceptance is terminated by his making of a counter-offer, unless the offeror has manifested a contrary intention or unless the counter-offer manifests a contrary intention of the offeree. 9

10. The “Mirror Image Rule”  §59. PURPORTED ACCEPTANCE WHICH ADDS QUALIFICATIONS. A reply to an offer which purports to accept it 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. 10

11. Acceptance vs. Counter-offer  Wholesaler offeror offers retailer offeree “a dozen 22 inch clay pots for $300.” Offeree emails back “Great. I’ll take three dozen.”  Not having heard from wholesaler, retailer emails back “OK, I’ll take a dozen.”  Is there a contract? 11

12. Acceptance vs. Counter-offer  Restatement § 36. Methods of Termination of the Power of Acceptance (1) An offeree’s power of acceptance may be terminated by (a) rejection or counter-offer by the offeree 12

13. Counteroffers: Dataserv Equipment at 247 13

14. Counteroffers: Dataserv Equipment at 247 Dataserv (seller) InDepth Technology (buyer) 14

15. Counteroffer as Rejection: Dataserv Equipment  Why was Technology’s response a counter-offer? 15

16. Counteroffer as Rejection: Dataserv Equipment  Why was Technology’s response a counter-offer?  Was Dataserv’s response an acceptance of a counteroffer?  Any third party installer…  The third objectionable clause 16

17. Counteroffer as Rejection: Dataserv Equipment  If Dataserv didn’t accept the counteroffer, could it go back and accept it later? 17

18. Counteroffer as Rejection: Dataserv Equipment  Restatement § 38(1). A party’s rejection terminates its power of acceptance. Once rejected an offer is terminated and cannot be accepted without ratification by the other party. 18

19. Acceptance vs. Counter-offer  Wholesaler offeror offers retailer offeree “a dozen 22 inch clay pots for $300.” Offeree emails back “Great. I’ll take a dozen but I’d really be much happier if you could send me three dozen.” 19

20. Acceptance vs. Counter-offer  § 61. Acceptance Which Requests Change of Terms. An acceptance which requests a change or addition to the terms of the offer is not thereby invalidated unless the acceptance is made to depend on an assent to the changed or added terms. 20

21. The Battle of the Forms 21  Why might this be a problem?

22. The Battle of the Forms 22  “The sender of the last form … could insert virtually any conditions it chooses into the contract” (254) Ionics

23. At Common Law  What happens at common law where: There is performance and indisputably a contract There has been a “Battle of the Forms” 23

24. The “Mirror Image Rule” at common law  §59. PURPORTED ACCEPTANCE WHICH ADDS QUALIFICATIONS. A reply to an offer which purports to accept it 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. 24

25. The “Mirror Image Rule”  Restatement § 36. Methods of Termination of the Power of Acceptance (1) An offeree’s power of acceptance may be terminated by (a) rejection or counter-offer by the offeree 25

26. The Last Shot Doctrine  The Last Shot Doctrine as a corollary of the mirror image rule 26

27. How is the Last Shot doctrine changed by the “infamous” UCC § 2-207? 27

28. Ionics at 250 28  Was there a battle of the forms?  If so, was this between merchants?  And what was the dispute?

29. Ionics at 250 Elmwood thermostats Ionics 29

30. Ionics at 250 30  Applying the last shot doctrine, what is the contract?  And who wins as to implied terms?  UCC 2-314: a warranty that the goods shall be merchantable … if the seller is a merchant with respect to goods of that kind

31. Ionics at 250  How would you apply UCC § 2- 207(1) (before the comma) to Ionics?  UCC § 2-207 (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 31

32. Ionics at 250  Who would win as to implied terms?  UCC § 2-207 (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 32

33. Ionics at 250  What about the proviso?  UCC § 2-207(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. 33

34. Ionics at 250  UCC § 2-207(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.  Qu. the Elmwood “Acknowledgement”: “only on the terms and conditions set forth herein” 34

35. Ionics at 250 35  In similar circumstances, how did Roto-Lith end up applying the Last Shot doctrine?

36. What happens then?  UCC § 2-207(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.  Roto-Lith: if the proviso applies, 2-207 is ousted and we’re back in the common law and the last shot doctrine 36

37. Ionics at 250 37  If Ionics rejects Roto-Lith, could 2- 207(2) be helpful?  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;

38. Ionics at 250 38  If Ionics rejects Roto-Lith, could 2- 207(2) be helpful?  (a) the offer expressly limits acceptance to the terms of the offer;  Was that the case in Ionics? Cf. clause 19 of the Ionics Purchase Order

39. Ionics at 250 39  If Ionics rejects Roto-Lith, could 2- 207(2) be helpful?  (b) they materially alter it; Was that the case in Ionics?

40. Ionics at 250 40  If Ionics rejects Roto-Lith, could 2- 207(2) be helpful?  The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:  (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

41. Ionics at 250 41  If Ionics rejects Roto-Lith, could 2- 207(2) be helpful?  (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received. Was that the case in Ionics? Clause 19

42. Ionics at 250 42  So what happens when 2-207(1) and 2-207(2) are both ousted?

43. Ionics at 250 43  So what happens when 2-207(1) and 2-207(2) are both ousted?  Two possibilities: There is “conduct by both parties which recognizes the existence of a contract” in 2-207(3) Or there isn’t

44. Ionics at 250 44  If there is “Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale” 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.

45. Ionics at 250 45  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.  And what would this be? See Comment 6 at 253

46. Step-Saver at 260  Is this a contract between merchants? 46

47. Step-Saver at 260 Wyse/TSL Mainframe hardware plus MS software Step-Saver (retailer) 47

48. Step-Saver at 260 Wyse/TSL Box top license disclaims warranties Step-Saver (retailer) 48

49. Shrink-rap Contracts  Was this a battle of the forms? 49

50. Shrink-rap Contracts  What did the District Court hold? 50

51. Shrink-rap Contracts  The District Court:  The box-top license as the crucial Last Shot offer 51

52. Shrink-rap Contracts  How did the Circuit Court interpret 2-207(1)? 52

53. Step-Saver  UCC § 2-207(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. 53

54. Shrink-rap Contracts  What about 2-207(1)’s proviso? unless acceptance is expressly made conditional on assent to the additional or different terms If the proviso applies, what happens? 54

55. Shrink-rap Contracts  Is that what Step-Saver did? Offeree must demonstrate an unwillingness to proceed unless the additional terms are included 55

56. Shrink-rap Contracts  Am I missing something here?  Clause 5: “Opening this package indicates your acceptance of these terms and conditions. If you do not agree with them you should promptly return the package unopened”? 56

57. Shrink-rap Contracts  Am I missing something here?  “Opening this package indicates your acceptance of these terms and conditions. If you do not agree with them you should promptly return the package unopened”?  But it did go ahead with the deal (does the proviso mean anything?) 57

58. Shrink-rap Contracts  Am I missing something here?  “best seen as one more form in a battle of the forms” 58

59. Hill v. Gateway at 267 59

60. Hill v. Gateway  Was this between merchants?  2-207(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: 60

61. Hill v. Gateway  What is RICO? 61

62. Hill v. Gateway  How was the arbitration clause an issue?  Federal Arbitration Act and federal pre-emption 62

63. Hill v. Gateway  Why does Easterbrook say that parties are bound to written agreements? 63

64. Where the buyer wants to be 64 UCC 2-207(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.

65. Hill v. Gateway  Was there a battle of the forms?  If not, what happens to 2-207 per Easterbrook? 65

66. If no battle of the forms, is 2- 207(1) ousted? 66 UCC 2-207(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.

67. If no battle of the forms, is 2- 207(1) ousted? 67 UCC 2-204(1): A contract for the sale of goods may be made in any manner sufficient to show agreement