Contract formation hinges on offer and acceptance. The mirror image rule demands exact matches, while the UCC's battle of forms approach allows for some flexibility. These concepts determine when and how contracts come into existence.

Understanding these rules is crucial for navigating commercial transactions. The mirror image rule's strictness contrasts with the UCC's more practical approach, reflecting the realities of modern business dealings using standard forms.

Contract Formation and the Mirror Image Rule

Mirror image rule in contracts

• Common law principle requires acceptance to be exact "mirror image" of offer
• Any deviation from offer terms considered counteroffer
• Determines when contract is formed
  • Contract only formed with valid offer and perfectly matching acceptance
  • Differing acceptance means no contract under mirror image rule
• Example: Offer to sell car for $10,000, acceptance at $9,500 is counteroffer, no contract

Counteroffer's effect on offers

• Response to offer proposing different or additional terms
  • Treated as rejection of original offer and simultaneously new offer
• Terminates the original offer
  • Original offeree can no longer accept initial offer after counteroffer
  • Original offeror free to accept, reject, or counteroffer the new offer
• Example: Buyer offers $500 for item, seller counteroffers at $600, original $500 offer terminated

The Battle of the Forms and the UCC

Battle of forms under UCC

• Situation where parties exchange conflicting standard form contracts
  • Common in commercial transactions with each party using own pre-printed forms
  • Forms may contain different or additional terms leading to dispute over contract terms
• UCC § 2-207 provides resolution
  • § 2-207(1): Definite acceptance operates as acceptance even with additional or different terms
  • Additional terms treated as proposals for addition under § 2-207(2)
    • Between merchants, additional terms become part of contract unless: (a) offer expressly limits acceptance to its terms, (b) additional terms materially alter contract, or (c) offeror objects
  • § 2-207(3) applies if forms create contract but terms conflict
    • Conflicting terms "knocked out" and replaced by UCC default provisions
• Example: Buyer's form has arbitration clause, seller's form is silent, arbitration added to contract

Application of contract formation rules

1. Mirror image rule scenario

   • Party A offers to sell goods to Party B for $1,000, delivery in 30 days
   • Party B accepts offer but changes delivery to 45 days
   • Party B's response is counteroffer, not acceptance under mirror image rule
   • No contract unless Party A accepts counteroffer with 45-day delivery

2. UCC battle of forms scenario

   • Party X sends purchase order for goods to Party Y
   • Party Y responds with acknowledgment form containing additional terms disclaiming warranties
   • Between merchants, additional terms become part of contract unless exception in § 2-207(2) applies
   • Disclaimer of warranties materially altering contract would not become part under § 2-207(2)(b)