By: William J. O’Sullivan

When businesses place an order for goods or equipment, they often trigger a “battle of the dueling Terms and Conditions.”  The would-be buyer attaches its T&C to the purchase order, and the would-be seller replies with its own version, attached to its order confirmation.  The seller might think, “Gotcha!,” but it isn’t that simple.

Let’s consider a hypothetical where Purchaser, of Pennsylvania, wants to buy a load of widgets from Seller, of South Carolina.  Purchaser emails to Seller a purchase order, accompanied by Purchaser’s standard Terms and Conditions.  That form says any litigation related to the order will be in the courts of Pennsylvania.

Seller replies with an order confirmation, which is consistent with Purchaser’s P.O. on the key elements of the deal – products, quantities, prices, delivery schedule, etc.  But the confirmation is accompanied by Seller’s own T&C, which predictably designates South Carolina as the forum for any litigation about the deal.  Whose form – and forum – prevails?

We start with the contract elements “offer” and “acceptance.”  Assume that Purchaser’s issuance of the purchase order was an offer to buy, and Seller’s confirmation was an acceptance of the offer.  (Note that that is not necessarily the case:  if Purchaser sent its purchase order in response to a quotation from Seller, then arguably the quotation was the “offer” and the P.O. was the acceptance.  But we digress.)

In 49 states and the District of Columbia, sales of goods are governed by Article 2 of the Uniform Commercial Code.  (As Stanley Kowalski reminded us in “A Streetcar Named Desire,” Louisiana prefers the Napoleonic Code.)  Under section 207 of Article 2, a clearly expressed “acceptance” or “written confirmation” may create a binding contract under some circumstances “even though it states terms additional to or different from those offered or agreed upon.”

So, Seller’s written confirmation, even with the conflicting forum selection clause in the T&C, may still operate as an acceptance, and thereby form a contract (unless the confirmation told Purchaser, no acceptance at all unless you specifically consent to our different terms).  They have a deal – but what about the incompatible forum selection clauses?

Given that kind of contradiction, most courts have ruled that the conflicting terms cancel each other out.  If Purchaser and Seller end up litigating, and the defendant raises a jurisdictional challenge, the court would probably approach the issue as if none of the documents even mentioned choice of forum.

Now let’s change the hypothetical a bit:  Purchaser’s T&C says nothing at all about choice of forum, but Seller has one that chooses South Carolina.  That is, Seller’s confirmation includes an additional term, not a conflicting one.

The UCC approaches this scenario a little differently.  Section 2-207 provides that in a business-to-business deal, the “additional term” should be treated as a “proposal for addition to the contract.”  Quoting from the statute, proposed additional terms will 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.

Let’s consider these exceptions, one by one.

Under exception (a), if Purchaser’s P.O., including the Terms and Conditions, said “you must accept this offer unconditionally,” then any additional terms in Seller’s T&C will not become part of the contract.

Under exception (b), Seller’s T&C will not automatically become part of the contract if they “materially alter” the terms of the offer as expressed in Purchaser’s P.O., including any associated T&C.  Most courts would probably not see the addition of a forum selection clause as a material alteration, so unless Purchaser promptly objects, Seller’s addition of that provision would likely stick.

Under exception (c), Seller’s T&C would not automatically become part of the contract if, either before it was issued or “within a reasonable time” afterward, Purchaser objects.

So, in sum:

• Both sides’ T&C probably apply to the extent that they don’t conflict with each other or with the negotiated terms of the contract.
• As for the second party’s T&C that differ from or materially alter the first party’s, they do not become part of the contract; most courts think when there are direct contradictions, the terms are cancelled out on both sides.

There are many variables here, and every situation is different.  Our purpose here is only to point out the complications that may arise when there is a clash of order forms.  When that situation arises, it is prudent to consult with counsel.