Battle of the Forms: Purchase Order vs. Acknowledgment
Northline Foods, a grocery distributor, faxes a purchase order to Harvest Valley Canning for 1,200 cases of diced tomatoes at $18.50 per case, delivery by June 15. The PO states: 'This offer is limited to these terms. Any additional or different terms are rejected.' Harvest Valley returns an acknowledgment quoting $19.10 per case and adding an arbitration clause and a disclaimer of consequential damages. Northline does not sign or object. Harvest Valley ships on June 20. Northline accepts the shipment, then discovers leaking cans caused by Harvest Valley's packing and claims $60,000 in lost sales. Harvest Valley moves to compel arbitration and to limit damages. Both parties are merchants. The acknowledgment does not state that acceptance is conditional on the additional terms.
1. Which terms govern the contract-Northline's purchase-order terms, Harvest Valley's acknowledgment terms, or UCC gap-fillers? Explain.
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Start with UCC 2-207(1). Harvest Valley's acknowledgment is a definite expression of acceptance even though it states additional or different terms, because it is not expressly conditional on Northline's assent. That makes a contract at the moment the acknowledgment is sent.
Next apply 2-207(2). Northline's PO expressly rejected additional or different terms. That objection prevents Harvest Valley's additional terms-the arbitration clause and the consequential-damages disclaimer-from becoming part of the contract. The price change is a different term, not merely an additional one. Most courts apply a knockout rule: the conflicting price terms cancel out and the gap is filled by UCC 2-305's reasonable-price term, unless course of performance or the parties' conduct supplies the price. The PO's $18.50 does not automatically lose, but Harvest Valley cannot force $19.10 merely by shipping.
So the contract consists of the agreed quantity and goods, the PO's delivery term, and UCC gap-fillers for price and other open terms. The arbitration and damages-limitation clauses are not part of the bargain. If a court instead treated the acknowledgment as a counteroffer, Northline's acceptance of the goods would still create a contract by conduct under 2-207(3), with the same result on the disputed clauses.
2. May Harvest Valley compel arbitration? May it enforce the consequential-damages disclaimer?
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No on both, on these facts. Arbitration clauses are generally treated as material alterations because they strip a party of the right to a court proceeding. Northline expressly objected to additional terms in its PO. Under UCC 2-207(2)(a), an additional term does not enter the contract when the offer expressly limits acceptance to its own terms. The acknowledgment was not expressly conditional, so Harvest Valley cannot argue that its terms necessarily prevailed.
The consequential-damages disclaimer fails for the same reason: it is an additional term, it is material because it cuts off a major category of recovery, and Northline objected in advance. The disclaimer also would have to satisfy UCC 2-719, which permits contractual limitations unless they are unconscionable or fail of their essential purpose. Because the clause never became part of the contract, the court does not need to reach that issue.
A practical caveat: if the parties had a course of dealing in which Northline routinely accepted arbitration clauses without objection, Harvest Valley might argue the clause was incorporated by the parties' own practices. The facts give no such history, so the motion to compel should fail.
3. If the leaking cans breached the contract, what remedies may Northline pursue, and what effect does the June 20 delivery have?
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The June 20 delivery is late. Under UCC 2-601, the perfect-tender rule lets a buyer reject goods that fail in any respect, including delivery time, unless the parties agreed otherwise. Northline accepted the shipment, however, so it lost the right to reject unless it revoked acceptance for a defect that substantially impaired value and was difficult to discover. Leaking cans may support revocation if the defect was latent, but acceptance does not waive damages.
For accepted goods, UCC 2-607 requires Northline to notify Harvest Valley within a reasonable time. Northline can then recover under 2-714 the difference between the value of the goods accepted and the value they would have had if delivered as warranted. It can also recover incidental and consequential damages under 2-715 if the loss was foreseeable and could not reasonably be avoided. The $60,000 lost-sales claim is consequential damages; because the disclaimer never entered the contract, that claim is not barred by agreement. Northline must prove causation and mitigation.
Late delivery itself supports damages measured by the difference between the value of timely performance and late performance, or by cover if Northline bought replacement tomatoes. Northline cannot recover twice for the same loss, and it must show the leaking cans-not its own storage or handling-caused the lost sales.