Like most states, Michigan has adopted Section 2 of the Uniform Commercial Code, which governs business transactions involving the sale of goods. One common problem that arises between commercial suppliers is a conflict between the terms and conditions found in form documents (such as quotations, purchase orders and invoices) exchanged between contracting parties. This situation is commonly referred to as the “battle of the forms.” Form contracts, while commercially expedient, may lead to questions as to (1) whether a contract is formed and (2) if so, which party’s forms should govern the performance of the contract.
Under Michigan’s version of the UCC, a few basic rules apply. First, a contract will be deemed to have been accepted (even though terms may differ), unless acceptance is expressly conditioned on assent (agreeing) to the different terms. In other words, an offer will not be rejected simply because the acceptance contains certain terms that may conflict with those set forth in the offer.
Second, additional terms set forth in an acceptance will govern unless: (1) the offer expressly limits acceptance to the terms of the offer, (2) the additional or different terms materially alter the contract, or (3) notification of objection to the additional or different terms has already been given or is given within a reasonable time after receipt of the additional terms.
Third, the parties’ conduct can give rise to an enforceable agreement, notwithstanding the provisions of their own form offers and confirmations. For example, conduct by the parties that recognizes the existence of a contract is enough to establish a contract for sale, even though the writings of the parties (without more) may not otherwise establish a contract. In such a 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 the UCC.
While it is important to carefully draft terms and conditions set forth in form contracts, clients should be aware that it is not possible to draft a form in such a way to ensure that the terms of the client’s contract will always govern. Accordingly, if a particular term is essential, it should be negotiated, and the party that requires the term should obtain the other party’s express agreement to it.
Please contact Wright Beamer today if you have questions about this or any other legal issue.
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