The Battle of Forms and the Mirror-Image Rule - Coursework Example

? The Battle of Forms and the Mirror-Image Rule Q Consider what is meant by the’ Battle of the forms'. The “battle of the forms” refers to a contest to determine who wins a case if a contract dispute is to be decided by a court1. It generally happens when two parties happen to exchange multiple documents during the negotiation process of a given transaction. This is especially when the two parties in the course of the contact conclusion happen to use their own standard forms, which are usually incorporated into the standard contract form2. Under normal circumstances, one party’s document will have different terms from the other party’s terms thereby begging the question: whose terms governs the contract? This is what leads to what is termed as the “battle of forms.” Such a case was explored by Lord Denning in Butler V. Ex-Cell-O3. In case there is a battle of forms in any transaction, a contract is assumed to have taken effect as soon as the last of the forms is sent and received without any issue or objection being taken to it. Nevertheless, a difficulty arises when it comes to deciding which form or part of the form is a term or a condition with regard to the contract in question. Under some cases, the battle is won by the party that fires the last shot. This is the general rule under the battle of forms4. The last shot rule provides that no contract comes into existence as long as an offer and acceptance does not match. Under such a situation, each party’s reference to its own general conditions is taken as a rejection of the other party’s offer, thereby treated as a counter offer. It is only if one party to the contract accepts the other party’s offer, plus all the conditions prescribed in it that a contract is deemed to have been formed. The terms of the contract in this case refer to those of the party who has managed to ‘fire the last shot.’ In most cases under the battle of forms cases, this becomes the seller5. For instance, by sending the seller a purchase order by making reference to its general conditions, the buyer makes an offer under his personal standard terms. Then, by making reference to his/her own standard terms in the reply the seller makes a counteroffer and consequently rejects the buyer’s terms. The buyer is implied to have accepted this offer through acceptance of its delivery. This was evident in the case between British Road Services V. Crutchley6 . In this case, the court held that Crutchley’s counter offer, which was not objected to by the British Road Services, was valid and, as such, carried the day7. From the case, it is evident that the victory was for the party that fired the last shot. It is worth noting that despite this being the general rule under battle of forms, certain exceptions exist. An exception comes where the victory goes to the party that gets in the blow first. For instance, where one party offers to sell at an express price based on the stated terms on the back and the buyer happens to order the same commodities implying to having accepted the offer on the order form with his own different terms on the back. If the difference happens to be so material to the extent that it may affect the initial price quoted, then the buyer is not supposed to be allowed to take advantage of this difference, not unless he/she notifies the seller regarding the difference. Such was the case between Butler V. Ex-Cell-O8. In the case between Butler V. Ex-Cell-O, it was the sellers who fired the first shot since they expressly made it clear that the contract was to be made only on their terms. Lord Denning alludes that in such a case, the seller should win the battle. Nevertheless, according to the ruling of the case by the court of appeal, the issue at hand was the question of who made the offer against the party that accepted it. As such, since the seller made the offer but the buyer later made a counter offer, which was accepted by the seller by raising no abjection, the buyer carried the day9. Application under English Law The last-shot rule is still being applied under the English Law due to a number of reasons. One reason is based on the fact that many English courts deal with battle of forms cases through the general contract rule of offer and acceptance. In this regard, a contract is deemed to have been formed only if the terms of the acceptance match exactly to those of the offer. Therefore, an acceptance which does not conform to the terms of the offer is considered a rejection of the offer, and is thereby treated as a counteroffer. Exceptions to the rule Exceptions are applied to the rule to the extent that: 1. A term considered meaningless is ignored, or 2. The rule does not apply to a reasonable intimation or a statement expressing only request or suggestion. Q. 2. Show what the traditional 'Mirror image' rule of contractual informations and give its advantages and disadvantages. The “mirror image rule” states that an offer must be accepted exactly as it is without modification. As such, any attempt aimed at accepting the offer on different terms results to a counter-offer, which constitutes a rejection of the original offer. This is based on the fact that it impliedly shows the intent of the offeree to reject the original offer as opposed to being bound by its terms10. Advantages One of the main advantages of the mirror image rule is that it lowers transaction costs by applying a strict rule instead of a flexible standard in determining whether a contract has been formed and in identifying the terms of the contract11. It also increases the level of the parties involved commitment to a particular contract. This is based on the fact that it requires that once the parties have agreed to enter into the contract with express terms, they are barred from altering it, as the parties are aware that any alteration would lead to a counter offer, threby amounting to rejection of the offer. This indeed increases the party’s level of commitment. Disadvantages of the Traditional Mirror Image Rule Injustice: The interpretation of this strict common law has the potential of frustrating commercial transactions, which often lead to unjust results. The most notable is the fact that the mirror image rule often lets one party to the contract slip off the deal for reasons that have absolutely nothing to do with the variations between the offer and acceptance12. The last shot opportunity: Another disadvantage associated with the mirror-image rule is that where the parties to the contract happens to exchange written proposals, the rule gives an unwarranted advantage only to the party that fired the last shot, which means the party that sent the last proposal wins the case13. This is true because under the battle of the forms doctrine, it is held that even if no contract is formed by the parties’ oral agreements, or in writing, a contract would still be deemed to have come into existence by performance, in case one party passed the goods to the other, and the latter party happens to keep them without expressly raising any objection or even paying for the goods. As such, if the parties exchanged written documents/proposals, and the other party varied the terms from the original one thereby becoming a counter-offer, the counter offer would be deemed acceptable in case there was transfer of the goods in question followed by acquiescence or payment thereof14. This is indeed, an unwarranted advantage provided by the rule. Rigidity: The rule is disadvantageous because it puts rigid insistence on specific correspondence between the terms of the offer and acceptance, which in itself creates a lot of difficulties in modern trading conditions. This is based on the fact that the business is required to rely upon standard terms without any alteration thereof15. This is explained by the case Butler Machine Tool Co. v. Ex-Cell-O Corp. Mechanical and High Cost: Yet again, the rule is also too mechanistic, formal and ignores most of the modern realities of trade and commerce. Furthermore, economically, the rule appears disadvantageous due to the fact that it fails to enforce mutual agreements and comes with high transaction costs. This is based on the fact that it does not promote the most efficient terms in a contract. Moreover, it disappoints the party’s intentions and the expectations of businesses16. Q. 3. Discuss Lord Denning's two stage approach to this issue. The application of the rule was brought into question by Lord Denning MR in the case between Butler Machine Tool Co., Ltd and Ex-Cell-O Corp in 1979. The court of appeal unanimously ruled in favor of the buyer, stating that it had relied on the traditional mirror-image rule, of offer and counter offer to solve the dispute17. Issue: The main issue pertaining to the dispute was to determine the effect of a counter-offer on an original offer in order to establish whether Butler Machine Tool Co, the seller under the contract, could rely on a price difference clause present in the contract’s standard form18. Standard Form Contract: This is a contract not negotiated individually by the parties but has similar terms for all transactions of that kind. Summary of Main Judgments Lord Denning MR Lord Denning M.R. accepted the court of appeal’s entire analysis of the case but pointed out that the rule was out of date and, therefore, should not be applied in resolving battle of forms cases. According to Denning, solving the problem of battle of forms cases should involve separating the question of contract formation from the question of the content. With regard to the question of formation of contracts, Lord Denning suggests that it is imperative to look at all the documents exchanging hands between the two parties at dispute, and gather from these documents or from the conduct of the parties, to establish whether both the parties have agreed conclusively on all material points, despite there being a difference between the terms and conditions printed at the back of the document. Denning reasoned that, by applying this guide, it will be established that in some cases where there is a battle of forms, a contract exists as soon as the last of the terms is sent and received without any objection to its contents19. As to the second question which pertains to the content of the contract, Lord Denning proposed that depending on the circumstances of the dispute, the contract can still be governed by either the last form sent, first or the compromised terms of both forms, with the irreconcilable terms being placed through reasonable implications. The reason for this suggestion is the fact that terms of the last form sent are only decisive if there is acceptance, implied or express from the conduct that the first form’s terms were to reign if its acceptance had material difference to the extent that they would affect the price. In addition, that the terms of both forms would reign if, the terms could be reconciled by the parties. Based on his proposals, he concluded by ruling in favor of the seller, arguing that the price variation clause in the sellers’ form prevailed throughout the whole contract. As such, the seller (Butler Co.) was entitled to rely on it. He went ahead to argue that the seller did all they could under normal circumstances to notify the buyer of the price variation clause20. The approach proposed by Lord Denning is a rule in its kind that is meant to relax the rigid traditional common law that has been in existence in England for many years now. Bibliography C Hugh, The Law of Contract (Cambridge University Press Cambridge:2003) 76 D Busch, The Principles of European Contract Law and Dutch Law: A Commentary, Kruler Law International London 2002) 56 G Ruhl, The Battle of the Forms: Comparative and Economic Observations, nd Helewitz. Basic Contact Law for paralegals, sixth edition (Aspen Publishers New York 2010) 67 https://www.law.upenn.edu/journals/jil/articles/volume24/issue1/Ruhl24U.Pa.J.Int%27lEcon.L.189%282003%29.pdf J Beatty & S Samuelson S Business Law and the Legal Environment (Standard Edition. Cengage Learning New York 2006) 112 M Frey & P Frey, Essentials of Contract Law (Cengage Learning Albany 2001) 123 M Whincup, Contract Law and Practice: The English System with Scottish, Commonwealth, and Continental Comparisons (Kluwer Law International New York 2006) 215 R Schaffer, F Agusti & B Earle, Internatgional Business and its Envioronment (7th ed. Cengage Learning Mason, OH 2008) 56 S Emanuel, Emanuel Law Outlines: Contracts (Aspen Publishers New York 2010) 105 S Kinsella, Smashing the Broken Mirror: The Battle of the Forms, UCC 2-207, and Louisiana’s Improvements: Lousiana Law Review (Lousiana State University Lousiana N.d) 1556-1575. Read More