Contracts - Hypothetical Exercises - Acceptance - UCC §§2-206 and 2-207

Issue. Rule. Application. Conclusion. Solid as IRAC.

In dealing with contractual issues it is best to start by looking for an offer. Once an offer is found you can move on to finding any form of acceptance.

Hypothetical One

A, let's call them, uh, I dunno, Taylor. Okay. So, Taylor orders a set of Taylormade golf clubs from B (Just B, weird huh?) for prompt shipment, via B’s monthly sports catalog. B then mails Taylor a set of Callaway golf clubs.

What happens? What if B included language stating that the clubs were merely an accommodation?

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So, the UCC applies. That was fun. Now what? We have a framework to start I.R.A.C.. On to

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It doesn't matter that Calloway clubs will shave a few strokes off Taylor's game due to their superior engineering. Even though the clubs (goods) are not what Taylor ordered (non-conforming) they were promptly shipped (invited acceptance...their shipment was an acceptance).

An offer was made by Taylor in the form of his order. The UCC states that an offer or order to buy goods for prompt shipment will be construed as accepted by shipping the goods, UCC 2-206(b).

Accepted. The shipment from B invited acceptance of the offer (Taylor's order was the offer). You say offer. I say acceptance. Contract formed. They did it! They formed a contract! It just so happens that B is in breach of that contract. Bummer.

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2-206(b). HOWEVER, if the seller "seasonably notifiies" the buyer that the non-conforming goods they just shipped were an accommodation then the shipment does NOT constitute an acceptance.

If B had included a note notifying Taylor that the clubs were an accomodation then it would not constitutue an acceptance by B. If B did not accept there is no contract.

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Hypothetical Two

Barry is a college student in Denver. He calls up Stan, a dealer in computer chips. Barry verbally orders 3 computer chips from Stan for $1,000, Stan agrees to ship them to Barry for no charge. Stan instructs Barry to send a check once the chips are received. There was no discussion of arbitration. Stan mails the chips to Barry along with an acknowledgement that matches almost all the terms of the verbal arrangement; the only difference is that acknowledgement also contains a provision which says, “Arbitration clause: any future disputes between buyer and seller must be settled by Artie’s Arbitration Company, located in NY, New York. If the purchaser does not agree to these terms, the purchaser can mail the chips back in the attached pre-paid envelope within 30 days.” Barry doesn’t read the acknowledgement, he mails Stan the check, and he uses the computer chips. Four months later, Barry wants to sue Stan for breach of warranty. Is the arbitration clause enforceable?

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Do the graph above and you should decide that the UCC does apply. The UCC applies to transactions in goods. Goods are moveable. Computer chips are moveable. Therefore, the UCC applies.

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According to UCC 2-207 an offeree's response must not expressly make acceptance conditional on assent to the new or different terms. There is no expressly conditional language in Stan's response. In order for the additional terms to be recognized the must be agreed upon by both parties. This is not the case here.

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Look at this big-ass chart! It is legitimately too big.

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The acceptance took place when Barry mailed the check and acceptance was not expressly conditional on the new terms. Additionally, both parties behaved as if a contract existed. If both parties were merchants the terms would not be included because arbitration materially alters the contract, however, only Stan can be considered a merchant. Because Barry is a mere student the additional term must be expressly consented to by both parties under 2-207(3). Stan and Barry are under contract but the arbitration clause was never a part of their contract.