DSF Week 4

On October 1, Doggy Daycare (“Daycare”) sends its own “Purchase Order” form to a dog food supply company (“Company”). The Purchase Order has blanks for type of food, quantity, price and delivery date, all of which Daycare fills in. Pre-printed Clause 15 in the Purchase Order requires Company to use the United States Postal Service for delivering the dog food.

Company receives the Purchase Order, and fills in the blanks in its own “Acceptance of Purchase Order” form. Company fills in the same information regarding type of food, quantity, price, and delivery date as were in the Purchase Order and sends the Acceptance form back to Daycare. However, pre-printed Clause 25 in the Acceptance form states that delivery will be done by U.P.S.

Daycare received the Acceptance form and checked to ensure that the type of food, quantity, price, and delivery date was correct and placed the form in its files.

The stated delivery date comes and goes, however, and Company never delivers the dog food. There is no communication between Company and Daycare other than set forth above.

Is Company liable to Daycare for breach of contract?

• No, because of the discrepancy in the shipping terms between the Purchase Order form and Acceptance form, the two parties never had a contract.

• No, because Daycare never assented to the different term.

• Yes, but only if Daycare had materially relied on Company sending the dog food.

• Yes, even though there was a discrepancy in the shipping terms between the Purchase Order form and the Acceptance form.

Answer explanation

Correct. This is a quintessential UCC § 2–207 case. At common law, there would have been no contract between Daycare and Company because of the discrepancy in the shipping terms. This was known as the common law “mirror image rule” and it provided that if the offer and acceptance were not mirror images of each other, no contract was formed.

Under UCC § 2–207, discrepancies between the offer and acceptance usually do not result in there being no contract. (The instances where such discrepancies will still result in no contract being formed are illustrated in other questions in this chapter).

The way to analyze a UCC § 2–207 case is to start by asking whether a contract was formed by the exchange of the writings or forms under UCC § 2–207(1). If the purported acceptance was a “definite and seasonable expression of acceptance,” and the acceptance was not “expressly made conditional” on the offeror’s assent to the additional or different terms in the acceptance, a contract has been formed, even if there are some differences between the two writings.

Here, Company’s acceptance was definite because it involved the same subject matter, quantity, and price as the Purchase Order. The acceptance was seasonable because upon receiving the Purchase Order, Company immediately sent its Acceptance of Purchase Order. Therefore, the two are in a contract based on UCC § 2–207(1) and when Company did not deliver the food on the promised date, it breached the contract.

Sam Seller tells Barry Buyer that he is considering selling his property. Sam invited Buyer to make an offer. Barry says: “How about $60,000?” to which Sam responds, “No, I wouldn’t consider selling it for less than $75,000.” Barry then says, “I accept, I’ll pay you $75,000 for your property.” There was no further communication between the two parties.

Is there a contract between Sam and Barry?

• Yes, because Buyer validly accepted Seller’s enforceable offer to sell the property for $75,000.

• Yes, because Seller’s failure to respond to Buyer when he said “I accept, I’ll pay you $75,000 for your property,” constitutes an implied acceptance on Seller’s part, since Seller invited Buyer to make an offer on the property in the first place.

• No, if the fair market value of the property was really $60,000.

• No, because Seller did not make an enforceable offer, so Buyer did not have the power to accept.

Answer explanation

Correct. Over time contract law has established certain phrases which have been held to be preliminary negotiations or solicitations to make an offer under Restatement 2d § 26, rather than an offer itself under Restatement 2d § 24. One of these is the phrase, “I wouldn’t consider selling for less than . . .” Hence, rather than making an offer to Buyer to sell his home for $75,000 with sufficient words of commitment, Seller is engaging in preliminary negotiations. Seller’s statement that he wouldn’t consider selling is also likely not certain enough to constitute an acceptable offer under Restatement 2d § 33. Under this rule, terms of a contract must be reasonably certain to provide a basis for establishing breach and providing an appropriate remedy. Here, Sam has not given a definite price, and has not mentioned how payment should be made, or when the sale would take place. Thus, this manifestation of intention was not certain enough to be effectively accepted. Instead, if anyone made an enforceable offer, it was Barry when he said he would buy Sam’s property for $75,000, although there are indefiniteness concerns in considering that conversation an offer as well

Contractor orders windowpanes from Supplier. Two clauses of Contractor’s Purchase Order provide:

All windowpanes supplied under this resulting contract shall be of stainable quality.

Acceptance of this Purchase Order is limited to terms of the Purchase Order. (“Limitation Clause”)

Supplier immediately sends Contractor an Acceptance of Purchase Order form that is identical to the Purchase Order form, with the exception of: (1) there is no Limitation Clause; and (2) there is a clause which provides:

Supplier warrants that its products are only of paintable, not stainable quality.

The windowpanes are timely shipped and are accepted by Contractor. However, a few weeks later, when Contractor installed the windows and began staining them, he discovered they were not of stainable quality, but of a lesser, paintable quality only.

Contractor sues Supplier for breach of contract, claiming the contract was for stainable quality windowpanes, not the paintable quality windowpanes Supplier sent.

In his suit for breach of contract, Contractor will likely:

• Prevail, because Supplier breached the contract when it sent windowpanes that were not of stainable quality.

• Lose, because Supplier sent its form second.

• Lose, because the contract was for paintable quality windowpanes.

• Lose, because Contractor accepted the windowpanes.

Answer explanation

Correct. Under UCC § 2–207 Contractor and Supplier had a contract for windowpanes of stainable quality.

The first step is to determine whether the parties had a contract based on the exchange of their forms under UCC § 2–207(1). They did. Supplier’s Acceptance of Purchase Order was an acceptance because it is a “definite and seasonable expression of acceptance.” UCC § 2–207(1). The acceptance was seasonable in that Supplier immediately sent the acceptance, and it was definite because it dealt with the same terms of Contractor’s offer (with the exceptions of the Limitation Clause and the provision regarding the stainable quality of the windows).

The next step is to determine what terms became part of that contract. When a contract is formed by exchange of forms under UCC § 2–207(1), the terms of the agreement are determined under UCC § 2–207(2). Under UCC § 2–207(2)(a), the different term of the acceptance does not become a part of the contract if the offeror included a clause in his or her form limiting acceptance to the terms of the offer, which occurred here. Thus, the terms of the contract were those in Contractor’s Purchase Order, which called for stainable quality windows. Since that’s not what Contractor was sent, Supplier breached.

Buyer submits a Purchase Order for 500 pounds of grapes at a price of $3 per pound. Seller then sends a “confirmation” acknowledging Buyer’s order for “500 pounds of bananas” at a price of $18 a pound. No further communication is exchanged between the parties.

Are Buyer and Seller in an enforceable contract?

• Yes, the two have a contract for 500 pounds of grapes at $3 a pound.

• Yes, the two have a contract for 500 pounds of bananas at $18 a pound.

• No, the two do not have a contract because their forms were too different.

• No, the two do not have a contract until and unless Seller ships the 500 pounds of bananas, regardless whether Buyer accepts them

Answer explanation

Correct. This problem illustrates one of the exceptions to the general rule under UCC § 2–207 that the exchange of forms usually results in an enforceable contract.

Under UCC § 2–207(1), an acceptance that has additional or different terms operates as an acceptance if it is “a definite and seasonable expression of acceptance.” Here, the “confirmation” is not a definite and seasonable expression of acceptance because the terms are too different from the offer. That is, an offer to buy 500 pounds of grapes at $3 per pound is not accepted by a promise to sell 500 pounds of bananas at $18 per pound. These are two different transactions.

In the language of UCC § 2–207(1), Buyer’s form was not a “definite . . . expression of acceptance.” The legal effect of an acceptance that is so far different than the offer is that the purported acceptance is treated as a counter-offer. So the status of the parties is that Seller had made an offer of 500 pounds of grapes at $3 per pound, and Buyer made a counteroffer to sell 500 pounds of bananas at $18 per pound. As the counteroffer was never accepted, no contract was formed between the parties, making Choice (C) correct.

On November 5, an electronics store owner realized that his stock of 15 copies of the most popular video game of the holiday shopping season would not last until the first of the next month. Seeing an advertisement from the manufacturer of the game in a trade journal listing its price at $3,000 per hundred, with delivery one week from order, the store owner e-mailed to the manufacturer an order for 100 copies of the game at $3,000 per hundred. There were no further communications between the store owner and the manufacturer. By November 25, the store owner realized that the manufacturer was not going to deliver any of the video games. He thus was forced to obtain additional stock by purchasing from a middleman at a cost of $4,000 per hundred. The store owner brings an action for breach of contract against the manufacturer.

Who will prevail?

Responses

• The manufacturer, because the communications between the parties were not definite or certain enough to form a contract.

• The manufacturer, because it never accepted the offer contained in the store owner’s e-mail.

• The store owner, because his e-mail was an acceptance of the manufacturer’s offer.

• The store owner, because he changed his position in reliance on the manufacturer’s promise to deliver the video games within one week.

Answer explanation

The manufacturer will prevail because it never accepted the offer. For a communication to be an offer, it must contain a promise, undertaking, or commitment to enter into a contract, rather than a mere invitation to begin negotiations. The broader the communicating media, e.g., publications, the more likely it is that the courts will view the communication as merely the solicitation of an offer. An advertisement in a trade journal generally is construed as an invitation to submit offers, not an offer itself. It is an announcement of the price at which the seller is willing to receive offers. Thus, the store owner’s e-mail was an offer that was never accepted by the manufacturer. (A) is wrong because the communications were definite and certain enough to form a contract. Under the UCC, only the quantity term must be definite and certain (or capable of being made so). Here, the quantity term, 100, was clear; the problem is that the offer containing it was not accepted. (C) is wrong because, as discussed above, the ad is not an offer. (D) is wrong because the ad in the trade journal was not a promise; hence, the store owner cannot rely on promissory estoppel or detrimental reliance to recover.