Thursday, April 11, 2013

Battle of the forms

I had an individual ask me to explain “the battle of the forms” so I decided to add a post on that subject. The battle of the forms refers to a situation where documents have been exchanged, there is no mutual agreement by the parties on the terms, and the work has commenced or been performed. A common example of this is when a buyer issues their purchase order form and the supplier sends an acceptance with additional or differing terms. That acceptance form was a counter-offer that is never accepted by the buyer so there is no final meeting of minds of the parties.

The scenario he provided was:
1) Buyer sends to Seller a RFQ.
2) Seller sends quotation with attached Sellers T&C’s. The quote states “any additional or differing terms in Buyer’s PO shall be void unless accepted in writing by both parties”
3) Buyer issues a PO with Buyer Terms which may be additional or conflicting to what the supplier proposed.
4) There is no agreement in writing to those additional or different terms
5) Seller begins performance or ships the product.
In every battle of the forms situation the question in is whose terms control? To determine that you need to review all the documents involved. The first document you would review would be the RFQ. Things to look for in the RFQ would be whether the proposal would be considered an offer that could be accepted by the buyer and
Whether there was any language in the RFQ that limited what the supplier could propose. If the RFQ did not limit what the supplier could submit as part of their proposal, the Supplier has the ability to limit or restrict their proposal was considered an offer. If there proposal wasn’t considered an offer it was simply a proposal that would be subject to further agreement on terms. The supplier’s proposal providing their terms and excluded additional or differing terms without agreement in writing.

The next document you would look at would be the purchase order terms. Were the terms on the purchase order silent about additional or differing terms? If it was, the purchase order could be interpreted as in acceptance of the supplier’s proposal and the supplier’s terms would apply. If the purchase order terms precluded any additional or different terms, the issuance of the purchase order would be a counter-offer that would need to be accepted by the supplier. The question here is whether the supplier’s commencement of the work would be considered an acceptance of buyer’s. Since the supplier’s proposal made it clear that their intent was to only agree to additional or different terms in writing, their commencement of performance would not be considered an acceptance. That creates the situation where there was no meeting of the minds by the parties. A meeting of the minds is required to form a contract.

There is a good flowchart about the battle of the forms under the Uniform Commercial Code that can be found at

There you can see that if there isn’t a meeting of the minds, a contract may still need to be constructed if the parties acted like a contract was in place. In the example, since the supplier commenced performance that was an act like there was an agreement, and the supplier’s acting created a form of detrimental reliance so an agreement would need to be constructed. Under the UCC, the battle of the forms is resolved by reviewing the documents involved. All terms that are common to both parties will remain in place. If there are either buyer terms that conflict with what the seller proposed or included in a proposal or acceptance, those additional or different buyer terms will be struck down. Similarly, if there are supplier terms that are in addition to or different from the buyer’s terms, those additional or different supplier terms will be struck down. If that leaves the contract either with no term or an incomplete term, the standard UCC term would be inserted to create the agreement.

As a buyer the best way to avoid a “battle of the forms” is to make sure that you have complete agreement by the parties on the terms. If the supplier has proposed additional or differing terms as part of a proposal, make it clear in your contract or purchase order that you are not accepting those terms. For purchase orders make it clear that any additional or differing terms included in the supplier’s acceptance shall be void unless specifically agreed to in writing by the parties. For any documents that will be part of the agreement, read them to ensure they do not have additional or different terms. Order of precedence clauses protect you when there are conflicts between the two documents where the higher precedence document prevails. Order of precedence clauses do not protect you against additional terms if those additional terms do not conflict with a term in the higher precedence document.For differing terms, to the extent that the differing term would change the higher precedence term, the order of precedence will protect you against those changes. To the extent the differing term contains additional terms that do not conflict, the order of precedence does not protect against those being part of the agreement.

For example:
Supplier’s proposal included a term that had five remedies for a specific breach.
Your agreement included only three.
You incorporated the supplier’s proposal by reference into your agreement.
The agreement gave precedence to the contract.

What would happen is if any the 5 were in conflict with the 3, the priority would be to your contract term.
If only two conflicted and the other 3 there were not in conflict, those additional remedies would be also part of the

When incorporating a document by reference in a contract or purchase order, always read that document. If there is anything in that document that conflicts with or is in addition to what you want, you can do two things. One is to have the supplier re-submit the document without the problematic language and incorporate that. Alternatively,as part of the incorporation, specifically exclude the problematic language from the incorporation showing your intent to not be bound by those additional or different terms.