PROBLEM
Synco, a producer of laundry detergent, in response to an inquiry from Bob’s Foodmart, sent the following letter:
“The price of our Super Clean laundry detergent is $10 per case of twelve 32 oz. bottles F.O.B. Gotham City.”
Upon receiving this letter, Bob’s sent Synco its purchase order for 5000 cases of Super Clean detergent. Included on the back of its form were the following provisions:
“1. All disputes arising out of this agreement shall be submitted to binding arbitration.”
When Synco received Bob’s purchase order it immediately returned an acknowledgment of order form which included the following provisions:
“THANK YOU FOR YOUR ORDER WHICH WILL BE GOVERNED BY THE TERMS AND CONDITIONS HEREIN. BEFORE ACCEPTING GOODS FROM CARRIER MAKE SURE THAT EACH ARTICLE IS IN GOOD CONDITION. THIS IS NOT AN INVOICE. AN INVOICE WILL BE SENT TO YOU WITHIN A FEW DAYS. SELLER MAKES NO WARRANTY EXPRESS OR IMPLIED WITH RESPECT TO THE MATERIAL, WORKMANSHIP OR QUALITY OF THE GOODS SPECIFIED HEREIN. ALL GOODS SOLD ON AN “AS IS” BASIS. IN NO EVENT WILL SELLER BE LIABLE FOR DAMAGES RESULTING FROM SUPERVENING CAUSES BEYOND ITS CONTROL.”
Bob’s made no objection to Synco’s acknowledgment. Within two weeks Bob’s received and paid for the detergent. Almost all of the detergent proved to be defectively manufactured. Bob’s served a demand for arbitration. Synco refused.
1. Is there a contract between Bob’s and Synco?
2. Must the dispute be submitted to arbitration?
Be sure to specifically discuss each of the provisions.
Discussion»via Contract Formation I | Center for Computer-Assisted Legal Instruction.
1. Since this is a sale of goods, Article 2 of the U.C.C. applies. Bob’s and Synco have entered into a contract for the sale of goods (2-105) and thus the provisions of Article 2 of the U.C.C. will apply. (2-103). Bob’s purchase order is an offer to purchase 5000 cases of detergent at $10 each and proposes an express warranty and arbitration. It manifests the required present intent to enter into a contract and is sufficiently definite. (Restatement 2d Contracts sec. 24; U.C.C. 2-204, 2-206).
Synco’s acknowledgment is a definite and seasonable expression of acceptance of Bob’s offer, since it was made in the manner invited by the offer. U.C.C. 2-206; Restatement 2d Contracts sec. 50. Section 2-207(1) of the U.C.C. provides that a definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless the acceptance is expressly made conditional on assent to the additional or different terms. Since Synco’s acknowledgment did not contain a statement that it was expressly conditional on assent to its terms, there is an express contract formed by the exchange of forms. White & Summers, Uniform Commercial Code, 3rd. ed., p. 31.
2. The arbitration term was included in the contract since it was a term included in the offer and not contradicted in the acceptance. White & Summers, Uniform Commercial Code, 3rd. ed., p. 36.
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