Mirror Image Rule
Classical position: Look for perfect match
On/Off – not a problem of determining content
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If offer and acceptance match in every respect, the contract is formed
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If offer and acceptance do not match in every respect, there is NO contract
Failed Acceptance may constitute a new, a Counter-Offer. Contract can be formed later, with conditions as stated in the Counter-Offer.
Remember rules hardly ever describe real-life situations, especially negotiations
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Theoretical concerns (MacNeil, The New Social Contract): the idea that it is possible to capture the whole content of the relationship in the one formative moment does not do justice to “contract”as a social institution
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“On/off” becomes a “sliding scale of consent”
The modern position :
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Look for substantial correspondence (CCQ, CISG, Unidroit)
If the acceptance does not correspond substantially to the to offer, it is a counter-offer
If the acceptance corresponds substantially to the offer, then the contract is formed and parties are bound
According to Uniform Commercial Code (USA):
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Contract even if divergence on material terms, if conduct is indicative of intention to be bound. (UCC)
UN CISG, art. 19: (Applicable only internationally)
This is an effort to mitigate the absolute on/off. Under the CISG, a K is created without a mirror image:
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As long as the modifications in the acceptance are not “material alterations”. This makes a contract under the offeror’s terms plus the offeree’s additional non-material terms (provided that the offeror doesn’t object)
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If the modifications are material terms, this constitutes a counter-offer. If the offeror accepts this “acceptance” (ie. by sending goods), there is a K on offeree’s terms [basically the same as CCQ].
19(1) looks like CCQ1393 (a reply that is different from the offer is a counter-offer….unless 19(2))
19(2) looks like CCQ 1393, 1387, 1388: allows there to be a contract even if not complete mirror image, as long as additional terms don’t materially alter
Uniform Commercial Code section 2-207:
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UCC is one step farther than the CISG, looking for conduct expressing the desire to be bound (performance)
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Possibility of recognizing contract even without clear indication of consensus on material terms. Usually this is by default a counter-offer situation (CCQ, CISG) and the contract would be based on the offeree’s terms (last shot). However, the UCC tries to get away from the unfairness of this with their “knock off” option (subsection 3) – here the contract is the terms the two parties agree on and the judge fills in the rest with the defaults (no arbitration, etc).
Sales Contract: The Uniform Commercial Code CB 206
§2-207 Additional Terms in Acceptance or Confirmation
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.
The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract
The offer expressly limits acceptance to the terms of the offer;
They materially alter it; or
Notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
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 parties agree, together with any supplementary terms
incorporated under any other provisions of the Act.
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Quebec Civil Code:
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Art. 1393
Acceptance which does not correspond substantially to the offer or which is received by the offeror after the offer has lapsed does not constitute acceptance.
It may, however, constitute a new offer.
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Art. 1421
Unless the nature of the nullity is clearly indicated in the law, a contract which does not meet the necessary conditions of its formation is presumed to be relatively null.
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Non-Material Terms
Is the divergence so important that it harms the crucial elements?
Three possible solutions:
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The contract based on the offeree’s terms (“last shot”)
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The contract is based on the offeror’s terms (“First shot”)
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The contract is based on those terms over which there is convergence. The rest is erased and the judge fills the gaps (“knock off”)
Solution
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Advantages
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Disadvantages
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No K at all [clearest expression of an autonomy interest]
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Most faithful to consensus ad idem
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Awkward (parties acted as if they had a K)
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First term (“first shot”) created the K
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Certainty on terms
Sellers can pressure buyers to change unreasonable terms
No incentive to prolong negotiations
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Unfair (always a K of adhesion)
Advantages the buyer (may not be bad)
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Last term (“last shot”) created the K
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Greater consent (possibly, though empirically, people don’t really read the forms)
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Prolongs negotiation (each wants to be last)
Uncertainty
Advantages the seller (may not be bad)
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Overlapping terms (e.g. price, quantity, usually + implied reasonable terms) create the K even if everything else is in dispute [clearest expression of an efficiency interest]
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“Saves the deal” by finding a K
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The K that’s found goes against what either party wanted (may not want such a different K saved)
Large role for the courts (well placed to decide what is reasonable)
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“Acceptance”
Material Immaterial
No contract objection No Objection
Counter offer No Contract Offeree has bought in and it’s a Contract
UN Convention for the International Sale of Goods (1980) – CISG – Article 19 CB 206
Applied between member states who have agreed to be bound by it (ratified by 70 countries) Adopted in all Canadian provinces and by the federal government: suppletive in all international Ks
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CISG
Article 19
A reply to an offer which purports to be an acceptance but contains, limitations or other modifications is a rejection of the offer and constitutes a counter-offer.
However, a reply to an offer which purports to be an acceptance but contains additional or different terms which do not materially alter the terms of the offer constitutes an acceptance, unless the offeror, without undue delay, objects orally to the discrepancy or dispatches a notice to that effect. If he does not so object, the terms of the contract are the terms of the offer with the modifications contained in the acceptance.
Additional or different terms relating, among other things, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party’s liability to the other or the settlement of disputes are considered to alter the terms of the offer materially.
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19.1: acceptance with modifications is a counter-offer (mirror rule of acceptance)
19.2: different acceptance = acceptance unless materially different or objected to without undue delay (vague) –offeror must object orally to discrepancies or dispatch a notice to that affect otherwise is acceptance
19.3: Additional or different terms in relation, among other things, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party’s liability to the other or the settlement of disputes are considered to alter the terms of the offer materially.
Article 2.209 - Conflicting General conditions CB 208
(1) If the parties have reached agreement except that the offer and acceptance refer to conflicting general conditions of contract, a contract is nonetheless formed. The general conditions form part of the contract to the extent that they are common in substance.
(2) However, no contract is formed if one party:
(a) has indicated in advance, explicitly, and not by way of general conditions, that it does not intend to be bound by a contract on the basis of paragraph (1); or
(b) without delay, informs the other party that it does not intend to be bound by such contract.
(3) General conditions of contract are terms which have been formulated in advance for an indefinite number of contracts of a certain nature, and which have not been individually negotiated between the parties.
The Uniform Commercial Code (UCC) § 2-207 (Additional Terms in Acceptance or Confirmation CB 206
*The Uniform Acts harmonize laws of sales and commercial transactions in the U.S. (50 states)
§2-207 (1) Is a contract formed? - 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.
§2-207 (2) the additional terms will become part of the contract unless the terms are material alterations (Last shot)
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Sales Contracts: The Uniform Commercial Code CB 206
§2-207 Additional Terms in Acceptance or Confirmation
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.
The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:
The offer expressly limits acceptance to the terms of the offer;
They materially alter it; or
Notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
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 parties agree, together with any supplementary terms incorporated under any other provisions of this Act.
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Arbitration Clause under the UCC
§2-207 (2) –an arbitration clause that was not in the original offer will be seen as a material alteration and thus would not be included (First shot)
§2-207 (3) -conduct on both parts recognizes existence of contract is sufficient to establish a contract, contract consists of the terms that parties agree on
Canceling out of contradicting terms and bring in default rues of legislature or case law (judge fills in these gaps) (Knock off)
Last Shot vs. First Shot in UCC
First Shot
Offer is restrictive
Counts as material alteration
Offeror objects
The parties are not merchants
Last Shot
In every other case (if both parties are merchants)
CML – Doughboy Industries, Inc., (1962), 233 NYS 2d 488 (C.A.): CB 181 |
Jurisdiction
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USA
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Facts
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Conflict between buyer’s order form and seller’s acknowledgment form for the purchase and sale of goods. Seller’s form contained arbitration provision, and provided that silence or a failure to object in writing would be an acceptance of the terms and conditions of this form. Buyer’s form had no general arbitration provision, but contained a provision that only a signed consent would bind the buyer to further terms imposed by the seller. Parties had done business on two occasions before, each party ignoring the other party’s printed forms, but carrying out the business transaction.
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Issues
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Is the dispute to be resolved by arbitration (as the seller wishes), or by litigation (as the buyer wishes)?
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Holding
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By litigation Buyer
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Reasoning
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Breitel J:
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This case involves the application of the arbitration clause in the terms and conditions attached to the buyer’s first and second acknowledgements
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Courts have laid down a rule stating that the agreement to arbitrate must be direct and the intention made clear, without implication, inveiglement or subtlety
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Even though on May 13, when the seller made a partial shipment, the contract was only documented by the buyer’s purchase order form, it is not dispositive – it was mutually acknowledged that further documents were to follow
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There was no question at this point whether there existed a contract, but only what were the material terms of the contract
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Traditional theory applies here – both parties had the duty to read the contractual instruments to which they were parties, but they did not
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In this case, both the seller’s and the buyer’s forms must be given effect
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However, because an agreement to arbitrate must be clear and direct, as set out by the courts, it should not depend solely on fine print – it is, in fact, a material term of the contract and must be spelled out
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In this case, because it was not spelled out, there exists no agreement to arbitration
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Ratio
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Material terms to a contract must be explicitly set out and agreed to, and cannot be inserted by implication, inveiglement, or subtlety in the fine print.
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Comments
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Typically, “battle of the forms” begins when the buyer sends a purchase order telephone acknowledgement by seller mail acknowledgment, often including more terms delivery, often including more terms, and potential acknowledgement form from buyer.
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J is not prepared to adopt a rule whereby the first or last form necessarily wins – rules instead that there was no successful effort to displace the dispute resolution mechanism
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A sense that arbitration clauses are special (courts are jealous of their jurisdiction, not eager to enforce Ks that take their authority away – perhaps different today, when courts are more willing to recognize arbitration)
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Recognition in para. 3 that both businesses are strong, and this is not a power differential case – he says this because law is a tool, and one party being deeply disadvantaged/manipulated might change the situation (unconscionability/lesion lurking in the background?)
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