UCC § 2-207 is an exception to the common law mirror image rule. This is an issue whenever you see a hypothetical involving (1) a transaction governed by Article 2 of the UCC; and (2) a response to an offer that modifies the terms in some way. The flow chart and explanation below are designed to illustrate how to walk through the analysis.
Under the mirror image rule, a response to an offer that modifies or adds to the offeror’s terms is not an acceptance; rather, it is treated as a counteroffer. Under UCC § 2-207, which applies to all contracts for the sale of goods, an expression of acceptance that modifies the offer can qualify as an acceptance. The statute dictates which terms govern – the offeror’s original terms or the offeree’s new terms.
A UCC § 2-207 analysis is a multi-step analysis, so let’s walk through it slowly. Read through what follows carefully, because it will help you make sense of the flow chart.
Let’s start by looking at the text of 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.
(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:
- (a) the offer expressly limits acceptance to the terms of the offer;
- (b) they materially alter it; or
- (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
(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.”
As you can see, UCC § 2-207 is divided into three subsections. Subsection (1) addresses whether there is a contract, and Subsections (2) and (3) dictate which terms govern the transaction.
Under Subsection (1), there is a contract only if there is a definite, seasonable, expression of acceptance with no proviso language making the offeree’s acceptance conditional on the offeror’s agreement to the new terms. In other words, there needs to be a timely response that clearly indicates contractual intent, and the offeree’s acceptance cannot be contingent on the offeror’s consent to it (it cannot say, for example, “We accept your offer, but only if you agree to the following new/different terms.”). The answer to that question – whether there is a definite, seasonable, expression of acceptance with no proviso language – will dictate how the analysis proceeds.
If there IS a definite, seasonable, expression of acceptance with no proviso language, we move to Subsection (2) to determine whether the offeree’s new terms become part of the contract. Subsection (2) provides as follows:
- If there is at least one non-merchant in the transaction, the new terms will not become part of the contract.
- If the contract is between merchants, the new terms will become part of the contract, unless (1) the offer specifically states that the offeror will not accept substitute or new terms; or (2) the new terms materially alter the contract; or (3) the offeror objects to the new terms within a reasonable time.
Note that Subsection (2) deals only with additional terms, not with conflicting terms. If the acceptance includes terms that actually conflict with the offeror’s terms, the court will apply one of two rules, depending on jurisdiction. Some jurisdictions use the knockout rule, in which the conflicting terms knock each other out of the contract. Other jurisdictions use the dropout rule, in which the offeree’s conflicting terms drop out of the contract. In either case, the offeree’s terms will not control.
If there is NO definite, seasonable, expression of acceptance, or if there is proviso language making the acceptance conditional on the offeror’s assent, this means there is no valid acceptance. We move to Subsection (3), which tells us that the court can still infer a contract by performance. In other words, a court can construe the parties’ dealings as an enforceable contract if the parties act like they are in a contract. If that is the case, the terms that govern will be only those the parties agreed to – any new or additional terms in the acceptance will not govern. If it is not possible to infer a contract by performance, there is simply no enforceable contract.
That is a lot of information! As you can see, the analysis has a lot of moving parts and can branch off into a lot of different directions. Go through it a few times to make sure you understand. The flow chart below should help you to visualize how to walk through the analysis. If you are still unclear, please take a look at our video on UCC § 2-207.