A finale to my prior two blog posts on the Connecticut Supreme Court’s decision in RBC Nice Bearings, Inc. v. SKF USA, Inc. You can read the decision here. Read my prior two posts here and here. In that case, the plaintiff RBC got burned because it basically never enforced its rights under a contract with the defendant, which was supposed to purchase a minimum amount of ball bearings each year from RBC. While the contract in that case appears to be a negotiated single contract, many contracts between buyers, sellers or distributors are created through an exchange of forms, such as purchase orders and order acknowledgements. Lawyers and judges refer to this as the “battle of the forms” because each side wants their own terms to be part of the agreement under the UCC. The analysis of which terms become part of the agreement and which terms “fall out” is complicated under Section 2-207. This flow chart from the Washburn University School of Law shows just how complicated. That doesn’t mean you shouldn’t draft your form to include terms that favor your company should the other party breach.
RBC reminds us how important it is to include favorable terms in a contract. Whether you are a buyer or seller, include terms indicating that no conduct should be deemed a waiver of rights under the agreement. Also, consider including an arbitration provision to avoid costly court litigation. Terms that dictate which state’s laws apply to a dispute, and where a dispute must be litigated are also important, as are provisions that allow you to recover attorneys fees in a dispute. A term in your form that makes acceptance “conditional” upon your terms being part of the agreement is very helpful. You can also include a term that preemptively objects to terms in the other party’s form that are different or additional to your terms. A seller should always include payment terms, warranty disclaimers, and limitation of remedies, for example.
It’s just smart business to review your purchase order terms and conditions or your order acknowledgements and have an attorney advise your company and revise them if necessary. Otherwise, you could end up losing the battle of the forms.