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Legal Aspects of Purchasing

Battle of the Forms

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Contract negotiations for major outsourcing transactions can be extremely complex. For smaller transactions, there remains the "battle of the forms."

Simple Procurement. Many times, parties will use "boilerplate" contracts to govern the terms of a sale. The buyer, for example, will send a purchase order with a set of boilerplate terms on the reverse side. The seller usually responds with an acknowledgment and invoice with another set of boilerplate terms. The boilerplate's terms, however, are usually not mentioned in any preliminary negotiations between the parties. Often the buyer and seller have no idea that the offer and acceptance are not in accord. The issue then becomes: does an enforceable contract exist and, if so, under what terms?

-The battle of the forms and its legal treatment is attributed to two factors. The first factor is the failure of the participants to read thoroughly the terms of the other party's form. The second factor is attributed to section 2-207 of the Uniform Commercial Code (UCC). Perhaps more criticism has been leveled against section 2-207 than any other provision of UCC. The section addresses contract scenarios in which commercial parties have failed to bargain effectively.

-Section 2-207 attempts to answer three questions.

a) Does the exchange of the conflicting forms constitute a binding contract?

b) If a binding contract exists, what are the enforceable terms?

c) If the exchange of forms does not establish a contract, but the parties nonetheless perform, what are the terms of the contract established by conduct.

-Unfortunately, judicial interpretation of section 2-207 varies widely, making the answers to these questions far from clear. Litigation of the battle of the forms derived from this section has produced hundreds of court decisions. A variety of alternatives and revisions have been proposed and debated and yet a definite resolution seems to be unreachable.

In the context of technology transactions, this presents problems regarding the use of electronic contracts ("web wrap agreements") and the use of electronic agents ("robots").

Outsourcing Contracts. Outsourcing differs from a simple procurement or simple "out-tasking" by the extended commitments of both parties and the implications for their respective business partners. Most vendors have standard forms of contracts. Most enterprise customers do not. Without a solid form of contract, the parties normally spend substantial time in negotiations. The documents may be complex, but the contract negotiations presage the ambience of the post-contract relationship. Not only must the contracts be carefully negotiated, the unique business strategies and concerns of both parties must be accommodated.

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Battle of Forms