CYIL 2012

LARRY A. DĎMATTEO CYIL 3 ȍ2012Ȏ those terms “materially alter” the acceptance. 74 The big difference between the UCC and CESL or the CISG is that the UCC does not provide a definition of “material.” American courts, understanding that in B2B transactions the exchanged forms will almost always be materially in conflict, have interpreted the concept of materiality out of the UCC. Put simply, there are no material terms. If the parties intended to enter a contract, as required under UCC Section 2-204, then the court will make an attempt to salvage the contract no matter how many missing or conflicting terms exist. In contrast, Article 19(3) of the CISG and Article 38(2) provide a broad definition of material terms including the use of expansive terms like “among other things” and any terms that relate to the “extent of one party’s liability to the other.” Thus, under the CISG and CESL almost all transactions domestic or transborder that involve an exchange of forms would not be legally enforceable contracts since the forms would conflict on a “material” term. This technically leaves it to the courts to find a contract concluded by the subsequent conduct (performance or partial performance) of the parties. All three instruments do not provide a rule for determining what terms make up the contract in the case of conflicting terms. This has led to a chaotic jurisprudence interpreting the UCC and the CISG battle of forms rules. Different courts have held that the terms of the offer control since the acceptance showed a general intent to accept those terms, despite the existence of additional or different terms in the offeree’s standard form (“first shot rule”). Other courts treat the would-be acceptance as a counteroffer and hold that the original offeror’s performance constitutes an acceptance by conduct and, therefore, the terms of the contract are those of the counteroffer (“second shot rule”). Other courts have held that conflicting terms are void leaving it to the court to imply a reasonable term (“knock-out rule”). Even though this seems to be the fairest rule, it still is unclear what the court should do with additional terms in the acceptance that do not conflict with an express term of the offer. In such a case, a court could use the knock-out rule to void the conflicting terms and, conceivably, either use the first shot or second shot rule to determine if the additional terms were incorporated into the contract. Alternatively, a court applying the knock-out rule could imply a conflict additional term versus no term and void the additional term. One commentator has provided a creative argument that if there are conflicting or additional terms, then the parties implicitly derogated from the CISG formation rules under Article 6 of the CISG. 75 Under this reasoning, Article 19 of the CISG would not apply and it is presumed the parties intended that the conflicting terms would not be a part of the contract. This is the mess that CESL could have improved upon instead of adopting the battle of the forms rule found in the CISG. This is a case of an important missed opportunity given the ubiquitousness of the exchange of forms in B2B sale of goods transactions. 74 See UCC Section 2-201(2)(b); CISG, Article 19(2); CESL Article 38(1) & (3). 75 Peter Huber & Alastair Mullis, The CISG: A new textbook for students and practitioners 94 (Sellier European Law Publishers 2007).

228