Battle of the Forms, Cover, and Consequential Loss

The exchange is governed by UCC § 2-207, not the common law mirror-image rule. 'We accept' is a definite expression of acceptance, so a contract is formed and the arbitration clause is a proposed additional term.

Between merchants, § 2-207(2)(b) makes additional terms part of the contract unless they would materially alter it. Whether arbitration materially alters is the pivotal call. The majority view says yes: an arbitration clause waives a jury trial and a judicial forum, and comment 4 treats surprise-or-hardship terms as material. A substantial minority compels arbitration, reasoning that the FAA favors arbitration and commercial parties expect the clause.

The FAA does not decide the question. Under Granite Rock and First Options, courts apply ordinary contract-formation law to determine whether the parties agreed to arbitrate at all; the FAA enforces agreements, it does not create them. Because the parties performed after exchanging forms, a court applying § 2-207(3) may alternatively find a contract by conduct and knock out all conflicting terms - the arbitration clause and both disclaimers alike. Either route reaches the same result: absent proof that Sunrise actually agreed to arbitrate, the motion should be denied.

The conflicting rejection periods (5 days vs. 10 days) cancel each other under § 2-207(3), and the gap-filler applies: rejection must occur within a reasonable time after tender (§ 2-602), and the buyer must give seasonable notice of the particular defect (§ 2-607(3)). Sunrise's conduct splits the shipment.

• The 4,100 conforming heads. Sunrise accepted them by installing and using them; no rejection question arises.
• The 900 defective heads. If Sunrise rejected them or revoked acceptance within a reasonable time after its quality test, it never accepted them; buying replacements is consistent with rejection or with cover. Continued use of those 900 after discovering the defect would constitute acceptance under § 2-606, leaving only a damages claim.

Cover under § 2-712 is proper if made in good faith and without unreasonable delay. Damages are the difference between the cover price and the contract price: 900 × ($3.40 − $2.00) = $1,260, plus incidental costs of cover. Sunrise cannot recover the price of the 4,100 conforming units; it got what it paid for.

Under § 2-715(2), consequential damages are available for losses the seller had reason to know about at the time of contracting. Valley sold labeling heads to a food producer; an eight-day line shutdown and the loss of a scheduled contract are the ordinary, foreseeable consequence of nonconforming heads. Such losses must be proved with reasonable certainty and with causation, not mathematical precision.

The remedy limits are the fight. Sunrise's form disclaimed consequential damages; Valley's disclaimed all warranties and limited the buyer to repair. The terms conflict, so under § 2-207(3) both drop out and the UCC's default remedial scheme - including consequential damages - governs.

Even on Valley's own terms, an exclusive repair remedy fails of its essential purpose under § 2-719(2) when the seller refuses to repair; the buyer then regains the ordinary remedies of §§ 2-711 to 2-715, consequential damages included. A negotiated exclusion of consequential damages between merchants would be enforceable absent unconscionability, but there is no negotiated agreement here - only an unaccepted proposal.

Result: the $1,260 cover differential, incidental costs, and the $40,000 lost contract are recoverable, subject to proof of causation and mitigation.