Session 08 - Battle of the Forms, Digital Contracts, and Acceptance

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I. Battle of the Forms (UCC § 2-207)

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A. Material Alterations and Surprise Hardship

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Marvin Lumber & Cedar Co. v. PPG Industries

• Facts: Marvin manufactured wooden doors/windows; PPG sold wood preservatives. PPG sent 66 acknowledgements with limitation of liability clause on back in fine print
• Issue: Does limiting liability clause involve element of unreasonable surprise and fail to become part of contract?
• Rule: UCC § 2-207 - Clause limiting remedy in reasonable manner involves no element of unreasonable surprise will become part of contract
  • Comment 4: Agreement is materially altered if addition would result in surprise or hardship without express awareness
• Analysis: Court followed Comment 4, rejecting Seventh Circuit’s view that hardship alone isn’t basis for finding material alteration
• Holding: Economic hardship here = court won’t impose additional language on opposing party without full awareness
• Key Principle: If surprise OR hardship, courts won’t enforce unless party was fully aware

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B. Last Shot Doctrine (Common Law Mirror Image Rule)

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Diamond Fruit Growers (Krack v. Metal-Matic)

• Facts: Krack manufactured cooling units using Metal-Matic steel tubing. Metal-Matic acknowledged each release order with disclaimer of consequential damages and limitation of liability. After 10 years, tube defect caused ammonia leak in Diamond’s warehouse
• Issue: Can Metal-Matic rely on contractual disclaimers to avoid contribution?
• Common Law Result: Under mirror image rule, seller’s acknowledgement = counteroffer; buyer accepted by accepting goods (Last Shot Principle)
  • Buyer had “last shot” to reject but didn’t
• UCC § 2-207 Analysis:
  1. Acknowledgement = definite and seasonable (timely) expression of acceptance
  2. If no contract under subsection 1, go to subsection 3
• Holding: Court upheld jury verdict; Metal-Matic partially responsible despite limitation provisions

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II. Digital Contracts and Shrinkwrap Licenses

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A. Shrinkwrap Licenses (Inside-the-Box Terms)

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ProCD v. Zeidenberg (7th Cir.)

• Facts: ProCD marketed SelectPhone database at different prices (lower for consumers, higher for commercial). License inside packaging restricted use to non-commercial purposes. Zeidenberg bought consumer version, created company to resell database commercially
• Issue: Can shrinkwrap license inside box be valid contract?
• Rule: UCC § 2-204(1) - Contract may be made in any manner sufficient to show agreement, including conduct by both parties
  • UCC § 2-606(1)(b) - Buyer accepts goods when, after opportunity to inspect, fails to make effective rejection under § 2-602(1)
• Analysis:
  • ProCD extended opportunity to reject if terms unsatisfactory
  • Zeidenberg inspected package, tried software, learned of license, did not reject
  • ProCD conditioned acceptance on using software after reading license
• Holding: Shrinkwrap license enforceable; Zeidenberg breached by commercial use
• Key Principle: Acceptance through conduct + opportunity to return = binding contract

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Gateway (Hill v. Gateway 2000)

• Facts: Computer ordered by telephone, paid by credit card. Box arrived with terms inside (30-day return period). Computer had problems after 30 days. Plaintiffs filed class action under RICO
• Issue: Are terms shipped inside packaging enforceable?
• Rule: Follows ProCD - buyer bound by terms accepted by keeping computer beyond return period
• Holding: Buyer must arbitrate dispute; terms enforceable
• Arbitration Clause Discussion:
  • Prevents jury trial and court access
  • Cost-effective but potentially biased
  • Limits class actions
  • Protects companies more than consumers

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B. Clickwrap vs. Browsewrap Agreements

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23andMe (In re 23andMe)

• Facts: DNA testing service. Purchase stage didn’t require viewing/accepting Terms of Service (only hyperlink). Account registration required review and assent to terms. Terms included arbitration clause
• Issue: Is arbitration clause enforceable under internet contract formation laws?
• Distinctions:
  • Browsewrap: User continues without knowing contract exists - insufficient notice during purchase
  • Clickwrap: During registration, customers reviewed terms and gave assent - sufficient notice
• Holding:
  • Terms NOT enforceable for customers who only purchased kit
  • Terms ENFORCEABLE for customers who created account + purchased kit
• Key Principle: Reasonable notice determines enforceability

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Meyer v. Uber Technologies

• Facts: Plaintiff registered for Uber on Samsung phone, agreed to T&C including arbitration
• Evidence: Screenshots show registration process (page 190)
• Holding: Clickwrap agreement enforceable; plaintiff bound to arbitration
• Key Elements: Clear display, must click to proceed

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Cullers v. Uber Technologies (Mass. 2021)

• Facts: Blind man denied rides three times due to guide dog; sued Uber
• Issue: Are app conditions enforceable if user not properly informed?
• Rule: Agreement not enforceable without reasonable notice of terms and conditions
• Holding: Against Uber - blind plaintiff not given reasonable notice
• Key Principle: Reasonable notice accounts for disabilities/circumstances

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Hastings v. Unicoin

• Facts: Online token sale; checkbox stating “I read statements, agree to privacy policy and terms of service” but no requirement to click hyperlink first
• Issue: Is arbitration clause enforceable?
• Rule: Reasonable internet user must understand they need to click hyperlink for terms
• Holding: Terms not enforceable - not clear to user
• Key Principle: Terms of service must be conspicuous and clear

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C. Constructive vs. Actual Notice

• Information publicly available, OR
• Could be reasonably discovered through ordinary care

• Real estate deeds (recorded to give notice)
• Liens (filed to give notice to world)

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III. Acceptance Principles and Hypos

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A. Counteroffers vs. Mere Inquiries

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Problem 1: Counteroffer Effect

• A: Offers Blackacre for $5,000 (30 days)
• B: “I will pay $4,800”
• A: Refuses
• B: Accepts within 30 days
• Result: NO CONTRACT
• Rule: Counteroffer kills original offer (acts as implied rejection)
• Case: Dead = dead for eternity unless revived

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Problem 1(B): Revival of Offer

• A: Offers Blackacre for $5,000 (30 days)
• B: “I will pay $4,800”
• A: “Cannot reduce price”
• B: Accepts within 30 days
• Result: YES - CONTRACT
• Rule: A’s response “cannot reduce price” = continued willingness to sell at $5,000, revives A’s offer
• Case: Livingston v. Evans (1925)

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Problem 1(C): Mere Inquiry

• A: Offers Blackacre for $5,000 (30 days)
• B: “Won’t you take $4,800?”
• A: Refuses
• B: Accepts within 30 days
• Result: YES - CONTRACT
• Rule: Mere inquiry does not terminate offer (no implied rejection)
• Distinction: “I’ll pay $4,800" (counteroffer) vs. "Would you take$4,800?” (inquiry)

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Problem 1(D): Counteroffer with Reservation

• A: Offers Blackacre for $5,000 (30 days)
• B: “I’m keeping your offer under advisement, but if you wish to close now, I’ll give you $4,800”
• A: Refuses
• B: Accepts within 30 days
• Result: YES - CONTRACT
• Rule: Counteroffer acts as rejection UNLESS offeree manifests contrary intention
• Analysis: “Keeping under advisement” = not rejecting original offer while exploring alternative

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Problem 1(E): Grumbling Acceptance

• A: Offers Blackacre for $5,000 (30 days)
• B: “I accept, but I still insist you are driving a hard bargain”
• Result: YES - CONTRACT
• Rule: Grumbling acceptance (expressing dissatisfaction but accepting) = valid acceptance
• Example: “Yes, but you’re charging too much” = still acceptance

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B. Implicit vs. Additional Terms

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Problem 2: Good Title

• A: Written offer to sell Blackacre
• B: “I accept if you can convey me good title”
• Result: YES - CONTRACT
• Rule: Providing good title is implicit in real estate offers - not violation of mirror image rule
• Distinction: “If you convey good title” (implicit) vs. “If you add tow package” (new term)

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Problem 3: Indefiniteness (Express Industries)

• Facts: DOT offered lease renewal for $3.5M. Express signed and returned, but cover letter stated “certain parts still under discussion with HRC regarding 70,000 sq ft exclusion”
• Later: DOT received $4.5M offer from another party, accepted it
• Issue: Can Express enforce contract?
• Trial Court & Appellate Division: For Express (essential terms agreed)
• Court of Appeal: REVERSED - entire agreement too indefinite
• Reasoning:
  • Third party (HRC) needed to make decision
  • Not clear what would happen
  • Cannot enforce contract without knowing essential terms
• Key Principle: Court can only provide remedy if can find breach; requires valid contract with essential terms

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C. UCC § 2-207 Applications

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Problem 4: Additional Acknowledgement Term

• A: Offers sale of goods to B
• B: Accepts but adds “Prompt acknowledgement must be made of receipt of this letter”
• Issue: Is there contract? What are terms?

• Prompt acknowledgement = qualification/condition
• Result: Counteroffer

• “Prompt acknowledgement” does NOT expressly condition acceptance on offeror’s assent
• Result: Contract exists
• Additional term = proposal for addition

• Issue: Does it materially alter contract?
• If no: Becomes part of contract
• Breach by failure to give notice = immaterial breach with only nominal damages ($1)

• Additional term = mere proposal (not part of contract)

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IV. Key Exam Concepts

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Reasonable Notice Standard

• Central principle for digital contracts
• Courts evaluate: Was notice conspicuous? Hidden? Clear opportunity to read/reject?
• Factors: Font size, placement, ability to scroll/review, opportunity to reject

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Material Alteration Test

1. Does it cause surprise?
2. Does it cause hardship (especially economic)?
3. Was party fully aware before agreeing?

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Acceptance Methods

1. Express acceptance: Clear “I accept”
2. Conduct: Using product beyond return period, keeping goods
3. Silence: Only when duty to speak OR custom/usage indicates acceptance
4. Grumbling acceptance: Complaining but accepting = valid

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Duty to Read

• General rule: Parties have duty to read contracts before signing
• Exception: Some jurisdictions (CA) require translation into buyer’s language (e.g., car sales in Spanish)
• Protecting yourself: Initial each paragraph, get copies, read before signing

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Arbitration Clauses

• Cost-effective
• Faster than litigation
• Confidential

• Limits jury trial right
• Prevents class actions
• Potentially biased (arbitrators paid by repeat players)
• Limits damages recovery

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Objective Theory Application

• How would reasonable person in that position interpret the language?
• Subjective intent irrelevant
• Focus on manifestation to other party

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V. Practice Tips

1. Always argue in the alternative: If contract claim fails, argue promissory estoppel/reliance
2. Cover yourself: Include multiple causes of action
3. Look for defenses: Economic duress, unconscionability, lack of notice
4. Don’t be afraid to ask questions: Even experienced lawyers ask basic questions
5. Make detailed notes: Add personal comments to create your own outline
6. Do practice MBEs: Repetition reduces mistakes, reveals nuances