Battle of the Forms in a Precision Bearing Supply Deal
Bearing Works Ltd (BWL) manufactures precision bearings. On 3 March, Apex Robotics emailed a purchase order for 12,000 units at $4.20 each, delivery by 30 June, stating that Apex's 'standard purchase terms' applied. BWL replied the same day accepting the order but attached its own terms, which included a 1.5% monthly late-payment charge and a force majeure clause. Apex did not respond. BWL delivered 4,000 units on 30 June; Apex accepted them, paid the invoice, and used the bearings in production. On 1 July, Apex sent BWL a signed 'framework agreement' that omitted the late charge; BWL never signed it. In September, after losing a major customer, Apex emailed that it was cancelling the remaining 8,000 units and would not pay any late charge. BWL sues for lost profit on the balance and for late charges on the paid invoice. Assume a UCC Article 2-style sale-of-goods regime and a two-year limitation period.
1. Was a binding contract formed for all 12,000 units, and whose terms govern? Explain the analysis step by step.
Read the worked answer
Step 1 - offer and response. Apex's purchase order was a definite offer. BWL's reply was a seasonable expression of acceptance even though it added terms; under a UCC 2-207-style rule, that forms a contract unless the acceptance is expressly conditional on assent to the new terms. Nothing in BWL's email says 'this acceptance is conditional.'
Step 2 - whose terms? The added terms are proposals. Between merchants they enter the contract unless they materially alter it, Apex objected, or Apex's offer expressly limited acceptance. A 1.5% monthly late charge is likely a material alteration because it adds a significant economic burden; a court may strike it and fill the gap with a reasonable interest rate. The force majeure clause may or may not be material. Apex's silence is not objection.
Step 3 - conduct confirms the balance. BWL delivered 4,000 units, Apex accepted, paid, and used them. That part performance and course of performance confirms a contract for at least the delivered goods and supports the existence of the 12,000-unit bargain. The unsigned framework agreement is irrelevant because BWL never assented; it cannot retroactively rewrite the deal.
Conclusion. A contract exists for 12,000 units. BWL's additional terms apply only to the extent not material; the late charge is vulnerable. The 8,000-unit cancellation is an anticipatory breach.
2. Does the unsigned framework agreement change the analysis? What if BWL had signed it?
Read the worked answer
No-an unsigned document is not a contract or modification merely because Apex signed it. A signature by one party does not bind the other. If BWL had signed, the analysis shifts: the framework agreement could be an integrated modification or a substituted agreement. Under UCC rules, modification needs no consideration, but if it falls within the statute of frauds, it must be signed by the party charged. A signed writing that omits the late charge could supersede prior terms if it is intended as a final expression; the merger clause matters. But timing matters: it came after BWL had already performed the first 4,000 units and after Apex's offer. A court would ask whether the parties intended the framework to govern future orders or to settle the existing dispute. Without BWL's signature, there is no assent; BWL can still rely on its original terms and the conduct.
3. What remedies can BWL reasonably seek, and what defenses should Apex expect to raise?
Read the worked answer
BWL can seek expectation damages: lost profit on the 8,000 units. If BWL is a lost-volume seller, UCC 2-708(2) allows profit including reasonable overhead; otherwise 2-708(1) gives contract price minus market price at the time of breach. BWL must mitigate by reselling or stopping production; it should document cover. Incidental damages and any enforceable late charge on the paid invoice are also claimable. Apex will argue (1) no contract for the balance, (2) the late charge is an unenforceable penalty or material alteration, (3) failure to mitigate, (4) commercial impracticability or force majeure if its customer cancellation qualifies-unlikely because loss of a customer is not an unforeseeable event excusing performance, and (5) accord and satisfaction if it tendered payment marked 'full payment.' BWL should avoid cashing any such check. Damages must be proved with reasonable certainty, not speculation.