I’ve advised people for years not to sign the other side’s purchase orders, acceptances, quotations, and other ordering documents unless the documents have been fully negotiated. That’s because it puts you at a huge disadvantage in the battle of the forms.
I’ve also advised people to negotiate terms that are essential — even if they don’t sign a fully-negotiated contract — and have both parties sign a document setting out those terms, because you can’t win the battle of the forms. So if — as a seller — a 12-month limited warranty and liability cap in the amount of your product’s purchase price are important to you, you should make sure that you and your buyers sign contracts agreeing to those terms. Otherwise, you’ll probably end up with a broad, four-year warranty and unlimited liability (the defaults under Article 2 of the Uniform Commercial Code, which governs contracts for the sale of goods).
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What better way to end my summer hiatus from blogging than to improve the blog’s most-read post? Back in March 2012 I hit “publish” on Battle of the Forms Explained (Using a Few Short Words). It’s a brief primer on section 2-207 of the Uniform Commercial Code–one of the more complicated areas of contract law–and it’s received about three times the traffic of my next most-popular post.
I included in the post an attractive flowchart illustrating the law and was recently informed by the chart’s creator, Todd Feldman, that he’d created a new and improved chart. I’ve incorporated the new chart into my original post and you can also find Todd’s handiwork on his website at picjur.com. Just click on the chart on his site to get a full-sized version.
A tremendous amount of business is conducted via purchase orders without signed contracts. Overall, this is good for commerce because business doesn’t have to screech to a halt every time a company needs to buy something, to give the lawyers time to work out the legal terms. But if there’s no signed contract, how do you know when a contract has been formed, and how do you know what the terms of the contract are?
These are million-dollar questions that are very difficult to answer and which are often litigated. In fact, it’s impossible to know the answers until after the fact because they depend on the specific facts and circumstances of each individual transaction.
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I’ve long thought that the “battle of the forms” is easy to lose but impossible to win. That’s the perspective of a commercial attorney who approaches the issue from the front end—where the battlefield consists solely of varied hypothetical future situations. A litigator on one side or the other, of course, wins each battle that goes to trial.
The battle of the forms refers to the common practice of doing business via purchase and sale documents containing “small print” boilerplate and the interaction of each party’s boilerplate in determining the actual contract terms. [click to continue…]