What is an example of Uniform Commercial Code (UCC) Section 2-207? What does it mean and how could it help merchants in their business dealings with other merchants?

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kipling2448 | (Level 3) Educator Emeritus

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Contract Law is a notoriously complicated field of study involving more imponderables than one can imagine. Having drafted legislation that eventually became law, and having interpreted numerous statutes and seen those same statues interpreted differently by others, I can categorically state that contracts are a hopelessly murky subject. The Uniform Commercial Code was established precisely because contracts and contract law is so complicated. The fact that it differs from state to state despite being a part of federal law lends the topic even greater fluidity. 

Section 2-207 of the Uniform Commercial Code, titled "Additional Terms in Acceptance or Confirmation," is an attempt at reconciling the unreconcilable: when is a contract not a contract, or, conversely, when do competing offers and counter-offers constitute a contract? Below is the full text of Section 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 contractBetween merchantssuch 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.

Reading this text, one can easily discern the problem, and the reason the Marx Brothers were so successful at satirizing the process of negotiating contracts in their film A Night at the Opera. The process of issuing offers and counter-offers and counter-counter-offers and so on invariably leads to disputes between the parties regarding what precisely the parties agreed to. Suffice it to say the so-called "last shot" rule, in which the final offer immediately preceding the shipment of the goods in question or the issuance of payment for those goods, was supposed to be supplanted by Section 2-207. 

Despite all of the above, for academic or illustrative purposes, conceptualization of a scenario to which Section 2-207 can be applied is not all that difficult. Simply come up with a product for sale by one party and an agreement by another party to purchase that product. The product or good can be anything: a car, furniture, food, or any other item. The transfer from one party to another will occur upon receipt of payment or agreement to pay. The application of Section 2-207 would come into play as soon as one party approaches the other with an offer and the other party responds with additions or variations of language not included in the original offer. Cars make the easiest example because there are so many variations of the same model of car, for example, color, engine size, type of transmission, type and quality of sound system, safety features not standard per government regulations, and so on. It is precisely because of the vast range of options for one model of vehicle that the car business is so daunting for so many people. The Toyota Highlander comes in 4- and 6-cylinder models, with or without a sunroof and with or without running boards, etc. The buyer needs to know precisely what the exact model being negotiated involves, and the precise terms being offered by the seller. And, of particular significance, both parties need to understand and agree to the specifics of the financial transaction. Because businesses purchase automobiles for commercial use, this example qualifies under the merchant-to-merchant parameters of the question.

Staying with the car example, suppose the seller forwards a written proposal with specific terms and conditions. Then, suppose the buyer reviews that proposal, makes deletions and/or additions as he or she deems fit, and sends that counter-offer back to the seller. Right off the bat, we've entered the murky world of contracts. The Uniform Commercial Code exists to ensure that both parties are on the same page, to employ an apt metaphor. The parties in our example, however, are not on the same page. There is a marked difference in their respective proposals to each other. Section 2-207 is intended to address the buyer's counter-offer: Hence, the term "additional terms in acceptance or confirmation." The point of Section 2-207, however, is that it nullifies the concept of a "counter-offer," replacing it with the formalization of an agreement between the two parties that states that the buyer has, in fact, agreed to purchase the vehicle in question, new language added by the buyer notwithstanding. It is important to note the use of the phrase "additional terms." The buyer's "counter-offer," which isn't, under the UCC, a "counter-offer," includes new language that does not necessarily negate or contradict the preexisting language; it simply adds to it. 

The mere existence of an agreement to transfer money or goods in exchange for goods from a seller constitutes a contract. The devil, as always, is in the details, and the UCC does less to clarify or rectify weaknesses in contract law than was intended. There remain definitional issues and the underlying problem is not solved. And that is why lawyers can charge hundreds of dollars per hour to work on contracts.

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