LEGAL FORMS
THE BATTLE OF THE FORMS
PHOTO SUBMITTED
Losing the Battle Is Losing the War
JAKE HOLLY Attorney Foulston Siefkin LLP
Buying and selling equipment, materials, and more is an everyday part of most businesses. For companies that buy and sell, form contracts with favorable provisions are not enough to protect your business interests. In any given supply chain transaction, many documents change hands: requests for quotations, acknowledgment forms, purchase orders, and more. Most of the time, those transaction go smoothly, and the contracts backing the transactions are barely reviewed. But when something goes wrong, the contracts come out for review, and the initial issue is which terms govern the transaction. This exchange, commonly referred to as the “battle of the forms,” can lead to increased liability and costs. So, before you find yourself in that situation, learn about a contracting strategy that can help you win the battle—and the war—of the forms. STANDARD FORM CONTRACTS Most businesses that regularly buy or sell use a boilerplate or “standard” form contract. Standard forms are a necessity—the transaction costs (time and money) would be too high to negotiate the terms of each individual deal. And businesses need certainty in allocating their risks.
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The exchange of standard forms is very common. Efficiency and time constraints demand businesses move forward without giving much attention to the fine print—until something goes wrong. UNIFORM COMMERCIAL CODE The Uniform Commercial Code (UCC) lays out the framework for the “battle of the forms.” It only applies in transactions involving “merchants,” which are essentially any business or person engaged in buying and selling products. One court of law called this UCC provision “a defiant, lurking demon patiently waiting to condemn its interpreters to the depths of despair.” This particular provision under the UCC addresses situations where companies have exchanged standard forms and agreed on the key deal points, such as price and quantity. However, the parties have never expressly agreed on other crucial points that don’t routinely come into play, such as warranties, choice of law, and limitations on liability. In this situation, the UCC determines what terms will govern if the parties still consummate the transaction and if properly contested, the default terms under the UCC will apply (commonly referred to as gap-fillers).
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