University:
Indiana University Bloomington
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

94

Pages:

2
Author:

bratrochanter

The text provides an overview of the Uniform Commercial Code (UCC) Section 2-207, or the “Battle of the Forms,” which modifies traditional contract law principles for sales of goods to allow more flexible contract formation in commercial transactions. Key points include: 1. Challenges with the Mirror Image Rule   In traditional contract law, an acceptance must exactly mirror the offer's terms, or else it becomes a counteroffer. However, in modern commerce, contracts often involve pre-printed forms that differ slightly, which can frustrate contract formation when terms don't match exactly. UCC Section 2-207 modifies this rule, enabling contracts to form even when acceptance forms contain additional or differing terms. 2. UCC Section 2-207 Provisions     Section 2-207(1) allows for contract formation despite some variation in terms, provided that the offeree’s acceptance is a “definite and seasonable expression of acceptance.” However, if the acceptance is expressly conditional on the offeror’s agreement to new or different terms, it’s not considered valid acceptance under Section 2-207(1). Section 2-207(2) applies when both parties are merchants, stating that additional terms become part of the contract unless: 1. The offer expressly limits acceptance to its terms, 2. The new terms materially alter the contract, or 3. The offeror objects to the terms within a reasonable time. Section 2-207(3) applies when parties’ actions acknowledge the existence of a contract (e.g., by performing) despite discrepancies in written terms. In such cases, the contract includes terms that the parties agreed upon plus any “gap-filling” provisions from the UCC. 3. Case Study: Belden v. American Electric Components, Inc. (AEC)   Background: Belden sold wire to AEC, but changed insulation materials without notification, causing product failure and a costly recall for AEC. Belden argued that terms in its acknowledgment form limited its liability for such damages. Court Decision: The court found that AEC never agreed to Belden’s additional terms (limiting damages) since Belden’s acceptance was conditional on AEC’s assent. Therefore, the writings did not establish a contract, but the parties' conduct did under Section 2-207(3). Thus, the contract included agreed terms plus UCC gap-fillers, excluding Belden’s liability limitations. 4. Communication and Manner of Acceptance   Offerors can specify how acceptance must be communicated (e.g., certified mail). If the offeree deviates, it may invalidate acceptance unless the offeror accepts the variation. When communication is instantaneous (e.g., face-to-face or phone), a contract forms as soon as the offeree says "I accept." For noninstantaneous forms (e.g., mail), acceptance timing depends on reasonable expectations, meaning it’s effective once properly dispatched. These principles illustrate how UCC Section 2-207 provides flexibility in contract formation for sales of goods, allowing business transactions to proceed even with minor discrepancies in terms, as long as the parties' intent to contract can be reasonably inferred.