Contract First Terms Later: UCC 2-207 Cases Continued

Statute of Frauds:
$500 Rule: has to be in writing. Most states you can get around with PE
Step-Saver Data Systems, Inc. v. Wyse Technology: Facts
Step purchased and resold copies of Wyse’s program was produced by TSL. Step-Saver would telephone TSL to place an order and then send a purchase order detailing the terms. TSL would ship the order promptly with an invoice containing essentially identical terms. No reference was made during phone calls to a disclaimer of any warranties. However, TSL printed the disclaimer on the software’s box-top. When the program failed to operate properly, Step-Saver filed suit gainst TSL and Wyse. DC held that the box-top terms governed the purchase, and granted a d/v for TSL. Appellate court reversed.
Step-Saver Data Systems, Inc. v. Wyse Technology: Rule
An additional term will not be incorporated into a K if the term’s addition to the contract would materially alter the parties’ agreement.
Which UCC provision applies to Step-Saver case?
UCC §2-207(2)(b)
ProCD, Inc. v. Zeidenberg: Facts
ProCD sells the select phone software, which has updated phone list compiled into a CD rom. In order to maintain its pricing fair and still cover overhead it engages in price discrimination. It sells the software to consumer/personal users at a lower price and sells it to commercial users at a higher price. Consumer boxes alert the consumer that there are terms and restrictions, but those terms and restrictions are located inside the box, and the consumer first needs to buy the product before learning of them. When the consumer goes to install the software it does not let him until he agrees to the terms, additionally consumers have a right to return the product if they don’t agree. D bought 3 of the boxes, started a corp, and made the info available online at a much lower price.
ProCD, Inc. v. Zeidenberg: Rule
A buyer accepts goods when, after an opportunity to inspect, he fails to make an effective rejection.

A vendor, as master of the offer, may invite acceptance by conduct and may propose limitations on the kind of conduct that constitutes acceptance.

Do they look to UCC 2-207?
No. Not a battle of the forms case.
Hill v. Gateway: Facts
P bought a computer over the phone and paid for it by CC. When he got the computer it included a list of terms which would govern unless the customer returns the computer within 30 days. P kept the computer beyond 30 days and then complained about its performance and components. P, after trying to use the warranty to fix the computer, filed suit in Federal court alleging that the D is a racketeer. D pointed out that the terms have an arbitration clause and they would like to enforce it.
Hill v. Gateway: Rule
The terms inside a box bind consumers who use it after an opportunity to read the terms and to reject them.
Dorton v. Collins & Aikman: Facts
Collins’ (D) acceptance form contained a compulsory arbitration clause, while Dorton’s order form did not. Dorton orally ordered carpeting from Collins. C’s acceptance contained a compulsory arbitration clause, and acceptance was subject to all terms and conditions of the form.
Dorton v. Collins: Rule
An arbitration provision may be deemed a nonmaterial alteration of the contract in certain circumstances.
Bayway Refining v. Oxygenated Marketing & Trading: Facts
Oxygenated Marketing (D) as a merchant in petroleum industry, made an offer to buy MTBE from Bayway, another merchant. Bayway’s response, which acted as an acceptance, contained a Tax Clause, which provided that Buyer shall pay seller the amount of tax. OMT did not object, and accepted delivery. Tax liability of 464K. Bayway paid and demanded reimbursement. OMT refused because it never agreed.
Bayway Refining v. Oxygenated Marketing & Trading: Rule
A merchant who asserts that a proposed additional term to a K constitutes a material alteration under 2-207(b) will not prevail on his claim where he fails to raise a factual issue as to whether the term results in surprise or hardship to him.
Under Bayway, Surprise has two elements:
Subjective element: what a party actually knew
Objective element: what a party should have known.
Bayway Refining v. Oxygenated Marketing & Trading: Reasoning
OMT (D) bears the burden of proving that the Tax Clause constitutes a material alteration (party opposed). Tax Clause is not per se material alteration exception. Bayway introduced evidence that Tax Clause reflects custom practice. Tax liability shifts to buyer. Because of this, OMT could not have been objectively surprised.
Which Surprise element did Bayway not meet?
Objective. The executives were shocked (subjective), but OMT failed to show that a reasonable merchant would be surprised by the Tax Clause.

Also failed to raise an issue of hardship. Small business suffering a loss is not enough.

It doesn’t matter if it is a hardship, it matters if it is a surprise.

You can’t walk away from a K because it turns out to be a hardship.

Per Se Material Exceptions
1. Arbitration Clauses
2. Waivers of Warranty
3. Clauses granting the seller the power to cancel upon buyer’s failure to meet an invoice.
4. Open ended tax liability
5. Between non merchants, additional terms are treated as proposals.
Northrop Issue
Waivers of warranty is a material per se exception. But here, it was different terms not additional.
Itoh v. Jordan: Facts
ITOH (P) sent JORDAN (D) a purchase order for steel coils. D sent back acknowledgement form which contained additional terms and stated that seller’s acceptance is expressly conditional on buyer’s assent to the additional terms. One of the additional terms was an arbitration term. P never assented to these additional terms but D shipped the steel and P accepted.
Itoh v. Jordan: Rule
Seller can take advantage of an expressly additional clause under 2-207(1) by electing to perform without incurring liability, but he then has to accept the potential risk under 2-207(3) of not getting his additional terms when he elects to proceed with performance without first obtaining the buyer’s assent to the terms.

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