Business Law and the Regulation of Business 11th Edition by Richard Mann, Barry Roberts

تمرين 2

FACTS On December 11, 1995, an explosion and fire destroyed several of Malden Mills's buildings at its manufacturing facility. Malden Mills and its property insurers, the plaintiffs Commerce Industry Insurance Company and Federal Insurance Company, brought suit in the Superior Court against numerous defendants, including Bayer Corporation. In their complaint, the plaintiffs allege that the cause of the fire was the ignition, by static electrical discharge, of nylon tow (also known as bulk nylon fiber), which was sold by Bayer to Malden Mills.
Malden Mills initiated purchases of nylon tow from Bayer either by sending its standard form purchase order to Bayer, or by placing a telephone order to Bayer, followed by a standard form purchase order. Each of Malden Mills's purchase orders contained, on the reverse side, as one of its ''terms and conditions,'' an arbitration provision.
Another ''term and condition'' appearing in paragraph one on the reverse side of each purchase order provides: ''This purchase order represents the entire agreement between both parties, not withstanding any Seller's order form, and this document cannot be modified except in writing and signed by an authorized representative of the buyer.''
In response, Bayer transmitted Malden Mills's purchase orders to the manufacturer with instructions, in most instances, that the nylon tow was to be shipped directly to Malden Mills. Thereafter, Bayer prepared and sent Malden Mills an invoice. Each of the Bayer invoices contained the following language on its face, located at the bottom of the form in capital letters:
TERMS AND CONDITIONS: NOTWITHSTANDING ANY CONTRARY OR INCONSISTENT CONDITIONS THAT MAY BE EMBODIED IN YOUR PURCHASE ORDER, YOUR ORDER IS ACCEPTED SUBJECT TO THE PRICES, TERMS AND CONDITIONS OF THE MUTUALLY EXECUTED CONTRACT BETWEEN US, OR, IF NO SUCH CONTRACT EXISTS, YOUR ORDER IS ACCEPTED SUBJECT TO OUR REGULAR SCHEDULED PRICE AND TERMS IN EFFECT AT TIME OF SHIPMENT AND SUBJECT TO THE TERMS AND CONDITIONS PRINTED ON THE REVERSE SIDE HEREOF.
The following ''condition'' appears on the reverse side of each invoice: ''This document is not an Expression of Acceptance or a Confirmation document as contemplated in Section 2-207 of the Uniform Commercial Code. The acceptance of any order entered by [Malden Mills] is expressly conditioned on [Malden Mills's] assent to any additional or conflicting terms contained herein.''
Based on the arbitration provision in Malden Mills's purchase orders, Bayer demanded that Malden Mills arbitrate its claims against Bayer. After Malden Mills refused, Bayer moved to compel arbitration. The court ruled in favor of Malden Mills.
DECISION The order denying the motion to compel arbitration is affirmed.
OPINION Greaney, J. This case presents a dispute arising from what has been styled a typical ''battle of the forms'' sale, in which a buyer and a seller each attempt to consummate a commercial transaction through the exchange of self-serving preprinted forms that clash, and contradict each other, on both material and minor terms. [Citation.] Here, Malden Mills's form, a purchase order, contains an arbitration provision, and Bayer's form, a seller's invoice, is silent on how the parties will resolve any disputes. Oddly enough, the buyer, Malden Mills, the party proposing the arbitration provision, and its insurers, now seek to avoid an arbitral forum.
Section 2-207 was enacted with the expectation of creating an orderly mechanism to resolve commercial disputes resulting from a ''battle of the forms.'' The section has been characterized as ''an amphibious tank that was originally designed to fight in the swamps, but was sent to fight in the desert.'' [Citation.] Section 2-207 sets forth rules and principles concerning contract formation and the procedures for determining the terms of a contract. As to contract formation, under § 2-207, there are essentially three ways by which a contract may be formed. [Citation.]
First, if the parties exchange forms with divergent terms, yet the seller's invoice does not state that its acceptance is made 'expressly conditional' on the buyer's assent to any additional or different terms in the invoice, a contract is formed [under subsection (1) of § 2-207].
Second, if the seller does make its acceptance 'expressly conditional' on the buyer's assent to any additional or divergent terms in the seller's invoice, the invoice is merely a counteroffer, and a contract is formed [under subsection (1) of § 2-207] only when the buyer expresses its affirmative acceptance of the seller's counteroffer.
Third, where for any reason the exchange of forms does not result in contract formation (e.g., the buyer ''expressly limits acceptance to the terms of [its offer]'' under § 2-207(2)(a), or the buyer does not accept the seller's counteroffer under the second clause of § 2-207[1]), a contract nonetheless is formed [under subsection (3) of § 2-207] if their subsequent conduct-for instance, the seller ships and the buyer accepts the goods-demonstrates that the parties believed that a binding agreement had been formed.
Bayer correctly concedes that its contract with Malden Mills resulted from the parties' conduct, and, thus, was formed pursuant to subsection (3) of § 2-207. A contract never came into being under subsection (1) of § 2-207 because (1) paragraph fourteen on the reverse side of Bayer's invoices expressly conditioned acceptance on Malden Mills's assent to ''additional or different'' terms, and (2) Malden Mills never expressed ''affirmative acceptance'' of any of Bayer's invoices. In addition, the exchange of forms between Malden Mills and Bayer did not result in a contract because Malden Mills, by means of language in paragraph one of its purchase orders, expressly limited Bayer's acceptance to the terms of Malden Mills's offers. [Citation.]
***
*** Where a contract is formed by the parties' conduct (as opposed to writings), as is the case here, the terms of the contract are determined exclusively by subsection (3) of § 2-207. [Citation.]. Under subsection (3) of § 2-207, ''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 chapter.'' § 2-207 (3). In this respect, one commentator has aptly referred to subsection (3) of § 2-207 as the ''fall-back'' rule. [Citation.] Under this rule, the Code accepts ''common terms but rejects all the rest.'' While this approach ''serves to leave many matters uncovered,'' terms may be filled by ''recourse to usages of trade or course of dealing under [§] 1-205 or, perhaps, the gap filling provisions of [§§] 2-300s.'' [Citation.]
***
Thus, the judge correctly concluded, under subsection (3) of § 2-207, that the arbitration provision in Malden Mills's purchase orders did not become a term of the parties' contract. The arbitration provision was not common to both Malden Mills's purchase orders and Bayer's invoices. Bayer properly does not argue that any of the gap-filling provisions of [the UCC] apply. Because Bayer concedes that it never previously arbitrated a dispute with Malden Mills, we reject Bayer's claim that the parties' course of dealing requires us to enforce the arbitration provision.
***
INTERPRETATION In cases in which a contract is formed by the parties' conduct (as opposed to writings), all conflicting written terms are invalid.
ETHICAL QUESTION Is it unethical for Malden Mills to try to avoid a term from its own forms? Explain.
CRITICAL THINKING QUESTION Do you agree with how the Code deals with the battle of the forms?