Presenting a live 90-minute webinar with interactive Q&A UCC Battle of the Forms: Confronting Conflicting Terms in Purchase Orders, Invoices and Related Documents Minimizing Disputes Over Contract Formation, Enforceability, Terms and Conditions in Commercial Sale of Goods Transactions WEDNESDAY, NOVEMBER 18, 2015 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: William J. Serritella, Jr., Partner, Taft Stettinius & Hollister , Chicago John M. Riccione, Partner, Taft Stettinius & Hollister , Chicago Douglas H. Fleming, Principal, Riddell Williams , Seattle The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Welcome UCC Battle of the Forms: Confronting Conflicting Terms in Purchase Orders, Invoices and Related Documents November 18, 2015 5
Minimizing Disputes Over Contract Formation, Enforceability, and Terms and Conditions in the Commercial Sales of Goods Transactions John M. Riccione William J. Serritella, Jr. Partner, Taft Stettinius & Hollister Partner, Taft Stettinius & Hollister jriccione@taftlaw.com wserritella@taftlaw.com Douglas Fleming Principal, Riddell Williams dfleming@riddellwilliams.com 6
The Bottom Line 1. Battle of the Forms is critical to your business – Unless you have a signed contract, you will be in a Battle of the Forms – For the sale of goods , it’s the buyer’s game to lose – For the sale of services , the winner may be whoever fires the “last shot” 2. You must have terms and conditions – If not, you are potentially stuck with the other side’s terms – Their terms will not favor you You should reference and attach your terms and conditions 3. – Every time – URL “ Magic Language ” matters 4. 5. Watch out for international transactions – The United Nations Convention on the International Sale of Goods (CISG) is not the same as the UCC – Default favors seller , not buyer 7
How Sales Contracts are Formed 1. By signed agreement 2. By exchange of purchase and sale documents 3. By conduct 8
Contract by Signed Agreement Best Case Scenario No Battle of the Forms 9
Countersigning • Avoid the battle and win the war – There is no battle of the forms if the other side signs your form — you win! – Create forms that give you a chance – When possible, try to get it signed o Casual efforts often work best o Little risk in trying unless you have no leverage and invite a request that you sign the other side’s form – Do not sign the other side’s forms – Countersigning is even more important for purchases of services 10
Contracts Formed by Exchange of Documents (Sale of Goods) Purchase and sale documents : Request for Quote, Quote, Purchase Order, Order Acknowledgement Shipping documents, Invoice (usually too late) When conflicts arise, 2-step analysis: 1. If/when was a contract formed? OFFER + ACCEPTANCE = CONTRACT Offer : o Typically Purchase Order o Can be Quote if the terms are sufficiently definite to invite acceptance by simply saying “ yes ” (varies by jurisdiction) Acceptance : o Typically Order Acknowledgment, but could be a Purchase Order if the Quote was sufficiently definite to constitute an Offer 11
UCC § 2-206: Offer and Acceptance in Formation of a Contract • An offer will be construed as inviting acceptance in any manner and by any medium reasonable under the circumstances. • UCC 2-201: The Statute of Frauds 12
The UCC Supplies “Gap Fillers” to Fill in Terms Which are Missing from a Contract • UCC § 2-305: Open Price Term • UCC § 2-306(1): Quantity Only if Output or Requirement • UCC § 2-308: Place for Delivery • UCC § 2-309: Time for Performance • UCC § 2-310: Time for Payment • UCC § 2-312: Title 13
Mirror Image Rule • Common Law • UCC 2-207(1) modifies the Mirror Image Rule • Exception : The Offer/Acceptance is expressly conditioned upon the assent to the terms and conditions in this offer/acceptance, including any additional or different terms. • Exception to Exception : Performance 14
UCC § 2-207(2)(a) – (c): Proposed Additional Terms Do Not Become Part of the Contract When: a) The offer expressly limits acceptance to the terms of the offer; b) The proposed terms materially alter the contract; or c) The recipient previously objected to inclusion of any additional terms or objects within a reasonable time after notice of the proposed terms was received 15
Material vs. Non-Material Additions (Sale of Goods) Material Terms: Split Among Non-Material OUT Jurisdictions Terms: IN Why : Result in surprise or LIMITING REMEDY IN A Why : No unreasonable hardship REASONABLE MANNER* surprise Examples: Examples: • • • Price, quantity, quality Arbitration clauses Limited (reasonable) time to complain • • Choice of law Attorneys fees • Credit terms within trade • • Limitation/disclaimer of Force majeure practice remedies? • Choice of law • • Limited right to rejection for 90-100% guaranty of • Payment of costs of defects (within customary deliveries collection/attorney’s fees trade tolerances) • Cancellation of contract upon upon breach • Interest on overdue invoices failure to pay a single invoice when due *In jurisdictions that follow the • Unreasonably short time for comments to UCC 2-718 AND complaints 2-719 16
What About Different Terms? (Sale of Goods) • Not the same everywhere – “ Majority Rule ” o Knock-out Rule o UCC gap fillers – “ Leading Minority Rule ” o Acceptor’s terms rejected o Offeror’s terms control! – “ California Rule ” (possibly also followed by New York) o Different terms treated the same as additional terms o Acceptor’s material terms rejected o Acceptor’s non -material terms added 17
Battle of the Forms “Hot Topics” The most common “Battle of the Forms” issues: 1.Warranty disclaimers 2.Limitations/exclusions of remedies 3.ADR clauses 4.Delivery terms 5.Insurance 18
Contracts Formed by Conduct: No Additional Terms (Sale of Goods) What happens when purchase and sale documents don’t meet elements necessary to form a contract (i.e., no agreement on key terms or “ expressly conditional ” language of 2-207(1) is used in acceptance)? UCC §2-207 continued. . . (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 . 19
The “Mirror Image Rule” (Sale of Services) • UCC 2-207 does not apply to sales of services • Common Law “ Mirror Image Rule ” – An acceptance that does not “mirror” the offer is deemed a counteroffer – Who fired the “ last shot ” before acceptance by performance? • Courts look to mitigate – Course of performance – Industry practice • Good forms won’t save you • You must be vigilant about responding to seller’s documents • Have countersigned agreements whenever possible 20
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