We all know that an agreement is formed when an offer is completely accepted by another. But what happens when an offer is accepted … but with a few revisions or new terms? The result depends on whether the agreement is governed by common law or the Uniform Commercial Code (“UCC”).
REVISED TERMS
On the MBE®, the common law applies to contracts that do not involve the sale of goods. The common law follows the mirror-image rule, which requires that an acceptance perfectly mirror the terms of the offer. As a result, a purported acceptance that includes revised terms is treated as both a rejection of the original offer and a counteroffer.
In contrast, the UCC applies to contracts that involve the sale of goods. The UCC follows the battle-of-the-forms rule, under which an acceptance is effective even if it contains revised terms. However, the treatment of those terms depends on whether the contract is:
- between merchants, in which case the revised terms are canceled out by the knockout rule and any resulting gaps are patched with the UCC’s gap-filling provisions or
- between at least one nonmerchant, in which case the revised terms are treated as proposed additions to the contract.
Here’s a simple graphic that highlights these differences:
NEW TERMS
Under the common law mirror-image rule, new terms have the same effect as revised terms—the purported acceptance is treated as both a rejection of the original offer and a counteroffer.
And under the UCC battle-of-the-forms rule, an acceptance is still effective if it contains new terms. However, the treatment of new terms again depends on whether the contract is:
- between merchants, in which case the new terms become part of the contract unless (1) the offer expressly required assent to any new terms, (2) the new terms materially alter the contract, or (3) the offeror objects to the new terms within a reasonable time or
- between at least one nonmerchant, in which case the new terms (like revised terms) are treated as proposed additions to the contract
Now that you’ve revised or added to your knowledge of contracts, you can use this tip when answering practice questions in the UWorld MBE® QBank.
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