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PENNSYLVANIA ADOPTS
“KNOCKOUT RULE”
ON BATTLE OF THE FORMS
Jack W. Plowman*
Pennsylvania was one of the
first states to adopt the Uniform Commercial Code in 1953. Amendments
have, of course, been made since that adoption a half century ago, but
it is still surprising that court decisions on rather fundamental
questions are still necessary, and being made in our appellate courts.
In the case of Flender Corp. v. Tippins International, Inc.,
830 A.2d 1279 (Pa.Super. 2003), the Court was called upon to decide
whether an acceptance of a purchase order, which acceptance contained
a different provision conflicting with the offer, bound the offeror as
to that differing provision. The Superior Court, in an opinion by the
Honorable Justin M. Johnson, held that the acceptance containing the
differing provision had the effect of “knocking out” the provision of
the offer to which it responded, to the extent it differed from that
offer.
The “battle of the forms” is a conflict familiar to all lawyers.
Under 13 Pa.C.S.A. §2207(a) (1999) it is provided that an acceptance
is effective although “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 quoted provision has been the subject of judicial interpretation
on numerous occasions, as to additional terms, but not as to
different terms, and such is the subject of the Flender
decision. The reason for the dispute grows out of Section
2207(b), which provides that “additional terms [not different terms]
are to be construed as proposals for addition to the contract.” Such
additional terms become part of the contract if the offeror fails to
object within a reasonable time, or unless the offer expressly limits
its acceptance to the terms of the offer, or unless the additional
terms “materially alter” the terms of the offer.
In the Flender case, Flender’s response to Tippin’s
offer contained not an additional term, but a different term, in that
the offer called for any dispute is to be “submitted to arbitration
before the International Chamber of Commerce in Vienna, Austria,” and
would be governed by Austria law. Flender’s acceptance provided that
any dispute is to be resolved in “the Federal and/or State Courts
located in Chicago, Illinois.” The item purchased was received and
accepted by Tippins, but Tippins failed to make payment. Flender
commenced suit in the Court of Common Pleas of Allegheny County, and
Tippins filed Preliminary Objections contending that Flender’s claim
had to be submitted to arbitration in Vienna, Austria.
The Court noted that the statute made a distinction between
“additional terms” and “different” terms. While Section 2207(a)
provides that additional or different terms in an acceptance do not
prevent a contract from being made unless the acceptance is made
conditional on the offeror’s assent to the additional or different
terms. Barring such, under Section 2207(b) additional terms (n.b.,
not different terms) are deemed part of the contract unless the offer
expressly limits acceptance to the terms of the offer, or unless the
counter-offer materially alters the proposed contract terms, or unless
objection is made to the counter-offer within a reasonable time. As
to “different terms,” the Court held that such in effect cancel, i.e.,
“knocks out,” each other.
All of this is, of course, important to the construction industry,
which transacts considerable business on purchase orders. Though
often acknowledgements are not read, they should be scrutinized as to
additional or different terms. It might be well for contractors’
issuing a purchase order to include a provision that the purchase
order offer is expressly limited to its terms, and that no additional
or different terms will become a part of the contract unless the
contractor thereafter expressly agrees to those additional or
different terms.
*Of counsel, Bentz Law Firm, P.C.; fellow, American
College of Trial Lawyers; member, American Bar Association Forum on
the Construction Industry; member, American Bar Association Fidelity
and Surety Committee; Member, National Bond Claims Association;
Adjunct Professor, Emeritus, Duquesne University School of Law,
Author, Pennsylvania Mechanics’ Liens (Professional Education Systems,
1989); Author, with K.W. Lee, Construction Contracting for Public
Entities in Pennsylvania (Lorman Education Services, 2002).
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