Battle of the Forms: Will your “standard” terms survive?

If your business is buying or selling commercial goods with standard terms of purchase or sale, you may have heard about the “battle of the forms.”  The battle is usually between the buyer’s purchase order terms and the seller’s order acknowledgment or invoice terms.  Almost without exception these terms don’t match one another.  When that happens, who wins the battle?

Before the Uniform Commercial Code (UCC) became law, the battle of the forms was resolved in favor of the party who fired the last shot – that is, whoever laid the last set of terms on the bargaining table before the seller shipped the goods and the buyer accepted them. Typically the seller – armed with its standard terms of sale when acknowledging the buyer’s earlier purchase order – won the battle.

Under today’s UCC, sellers and buyers should beware. When there is a dispute involving a transaction where the seller and buyer simply exchanged their standard forms, the unmatched terms will be disregarded and substituted with default terms under the UCC that may be less desirable.

For sellers, losing a battle of the forms under the UCC can be especially painful. For example, a buyer’s standard purchase order may provide for broad product warranties from the seller and unlimited seller liability. Conversely, a seller’s standard terms may include narrow warranties and limit its liability to the buyer. In a battle of the forms under the UCC, these conflicting terms are “knocked out” and replaced with UCC default terms that are more favorable to a buyer, such as expansive seller warranties and potentially significant seller liabilities.

Standard forms can save time and reduce costs in documenting a simple transaction for the purchase and sale of commercial goods. If all goes well, it won’t matter that the parties didn’t negotiate a single set of contract terms or that the terms of their standard forms differ. But buyers and sellers in these transactions should weigh these efficiencies against the potential costly and time-consuming legal battle that may ensue if all doesn’t go well.

Consider the benefits of investing the time and resources necessary to negotiate a contract with one set of master terms that are agreeable to both parties, particularly where you plan to do business with one another in a number of transactions. You may find the benefits outweigh the risks.

And if you’re wondering how the battle of the forms plays out in this age of contracting under electronic click-wrap, sign-wrap and other similar arrangements, watch for our future blog article on that topic.

This article is made available by Corporate Counsel Group LLP for educational purposes only and to give you general information. It is not legal advice.