← The hardest concepts in United States law
In one breath
Under UCC section 2-207, in a sale of goods a reply that agrees to a deal but adds or changes terms can still form a contract, instead of being a counteroffer. Whether the extra terms join the contract depends on whether the parties are merchants, whether the terms materially alter the deal and whether the first party objected.
The picture
The handshake with a sticky note
Two traders shake hands on a sale: this many crates at this price. The handshake is the deal. Each of them also sticks a note on the other’s paperwork with extra terms of their own: how to settle disputes, who pays for damage in transit. The old rule was strict: a note that did not match meant no handshake had happened. The modern rule keeps the handshake in place, and treats the notes as proposals to add to it.
Whether a note stays stuck depends on who the traders are and what it says. Between merchants, a proposal sticks unless the first trader said in advance that only his own terms were acceptable, or the note would change the deal in a serious way, or he objects. And if both sides stick notes that contradict each other, many courts peel both off and let the law’s default rules fill the gap.
Where the picture stops working
A handshake feels final in a way the exchange of forms may not. The section can create a contract between parties who never saw each other’s fine print. It also works only for goods. And a reply can say, in plain words, that its acceptance is conditional on the other side agreeing to its terms; then there is no handshake from the forms, and any contract arises later from conduct.
How it really works
- 1Check that Article 2 applies: is this a sale of goods? If not, the common-law rule that a reply must mirror the offer applies, and a reply with changed terms is a counteroffer.
- 2Ask whether the exchange forms a contract. Section 2-207(1) says a definite and seasonable expression of acceptance operates as an acceptance even though it states additional or different terms, unless acceptance is expressly made conditional on assent to them.
- 3If the writings do not form a contract but the parties perform anyway, section 2-207(3) finds a contract from their conduct. Its terms are those on which the writings agree, together with the Code’s gap-fillers.
- 4For additional terms between merchants, they become part of the contract unless the offer limits acceptance to its own terms, the terms materially alter it, or notice of objection is given. Where a party is not a merchant, additional terms are only proposals.
- 5For different (conflicting) terms, courts disagree. Many apply a knockout rule: the conflicting terms cancel out and the Code fills the gap. Others treat them like additional terms, or let the offeror’s term prevail.
Why people get it wrong
- Assuming the last form sent wins. Section 2-207 was written to reject this “last shot” approach.
- Treating every added term as part of the deal. Between merchants, terms that materially alter the agreement drop out.
- Treating different terms like additional terms. Courts handle them differently, and the splits are real.
- Reading “expressly conditional” loosely. Courts require clear language that the replying party will not go forward without the other side’s assent.
- Forgetting it covers goods only, and that a negotiated agreement or a signed contract may sidestep the problem.
A worked example
The facts are invented
Verde Orchards emails a purchase order for five hundred crates of pears at a stated price. Its form says nothing about arbitration. Apex Farms replies with an acknowledgment that agrees to the quantity and price and adds a clause sending all disputes to arbitration and another disclaiming all warranties. Both are merchants. Apex’s reply is a definite expression of acceptance, not expressly conditional, so a contract forms on the agreed terms.
The two clauses are additional terms. A blanket warranty disclaimer would ordinarily be a material alteration and drop out. Whether an arbitration clause is material is a point on which courts differ. If Verde’s order had said that no other terms would be accepted, both would be excluded. If Apex’s reply had said that its acceptance was expressly conditional on Verde’s agreement to the new terms, there would be no contract from the forms, and if the pears were shipped and accepted, the contract would arise from conduct on the agreed terms, with default rules for the rest.
Try it
A merchant buyer sends a purchase order for goods. A merchant seller returns an acknowledgment that agrees to the quantity and price and adds an arbitration clause. The order did not limit acceptance to its own terms, the buyer never objected, and the acknowledgment is not expressly conditional. What is the best statement?
Landmark authorities
Read the sources themselves; this list is a starting point.
- Uniform Commercial Code, section 2-207
- Dorton v. Collins & Aikman Corp., 453 F.2d 1161 (6th Cir. 1972)
- Restatement (Second) of Contracts, section 59
Where to go next
More hard concepts in United States law
- The parol evidence rule (Contracts)
- Promissory estoppel (Contracts)
- Proximate cause (Torts)
This page is an educational overview. It is not legal advice and not a substitute for the sources: the statute, the rule, the case itself. United States law is made in fifty states and in the federal system, and the rules differ between them. Each page states the usual formulation of the rule and names landmark decisions; your own state, circuit or course may use different wording. Check the primary sources before relying on any rule.