(a) Unless otherwise unambiguously indicated by the language of the offer or the circumstances:

(1) An offer to make a contract invites acceptance in any manner and by any medium reasonable under the circumstances.

(2) An order or other offer for prompt or current deliveryshipment invites acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming informationcopies, but a shipment of non-conforming copies information is not an acceptance if the party that provides the shipment information seasonably notifies the transferee that the shipment information is offered only as an accommodation to the other party.

(3) If the beginning of a requested affirmative performance is a reasonable mode of acceptance, an offeror that is not notified of acceptance and has not received the performance within a reasonable time may treat the offer as having lapsed without acceptance.

(b) Except as otherwise provided in subsection (c), aA definite and seasonable expression of acceptance in a record may create a binding obligation, even if the acceptance contains terms that vary the terms of the offer. If the offer and acceptance are in records that contain varying terms, the following rules apply:

(1) If the acceptance materially conflicts with a material term of the offer or otherwise materially alters the offer, no contract is formed by the purported acceptance unless from all the other circumstances including the conduct of the parties, it appears that an agreement existed. If a contract is formed under this subsection, the terms of the contract are determined:

(A) under Section 2B-207 or 2B-208, if one party agrees, by manifesting assent or otherwise, to the other party's terms other than by the terms of the acceptance that contained the varying terms;

(B) under Section 2B-209 if subparagraph (A1) does not apply and the contract is formed by conduct.

(2) If there is no material conflict or alteration to which subsection (b)(1) applies, with a material term and no material change in terms, the terms of the contract are those of the offer as adopted under Section 2B-207 or 2B-208. Non-material additional terms contained in the acceptance are treated as proposals for additional terms and become part of the contract but only if they are not objected to by the offeror within a reasonable time after notice of them is received.

(c) An offer or acceptance that because of the circumstances or the language is conditional on agreement by the other party to the terms of the offer or acceptance precludes contract formation unless the party except by agrees, ment, by manifesting assent or otherwise, to its terms. However, in this case, the following rules apply:

(1) A party may waive the conditional language in its offer or acceptance by its conduct or otherwise. Such conditional language in a standard form precludes the formation of a contract only if the party proposing the form containing the conditional language acts in a manner consistent with that language, such as by refusing to perform, refusing to permit performance, or refusing to accept the benefits of the contract until the proposed terms are accepted.

(2) If a party agrees, by manifesting assent or otherwise, to an effective conditional offer in a record, it adopts the terms of that offer under Section 2B-207 or 2B-208, as applicable.

Uniform Law Source: Section 2A-206; Section 2-206.

"Agreement": Section 1-201. "Contract". Section 2B-102. "Information". Section 2B-102. "Notifies". Section 1-201. "Party". Section 1-201. "Receive". Section 2B-102. "Record". Section 2B-102. "Standard form". Section 2B-102. "Term". Section 1-201.

a. Approved in principle. (September, 1996).

1. Basic Premise and Coverage. This Section deals with three recurrent issues involving offer and acceptance in the creation of a contract: general methods of indicating acceptance, acceptances that vary the terms of the offer, and condition offers or acceptances. While the Section provides guidance on determining the terms of a contract if one is formed, this Section must be read in connection with Section 2B-207, 2B-208and 2B-209 for that purpose.

2. Methods of Acceptance and Formation. Subsection (a) conforms to Article 2-206(1). It allows acceptance of an offer by a variety of means, including the exchange of conflicting standard forms and behavior, but also recognizes the right of the offeror to control the terms and nature of the acceptance if it does so unambiguously in the offer itself.

3. Acceptance that Varies the Terms of an Offer. Subsection (b) follows Article 2-207 and rejects the mirror image rule which would permit a binding contract only if the acceptance fully matches the offer. This allows contract formation by offer and acceptance even though the acceptance varies the terms of the offer. That recognition corresponds to commercial practice throughout all areas of commerce. As in Article 2, the varying acceptance must be an acceptance; no contract is formed by a counteroffer unless that counteroffer is accepted.

Contract formation by an acceptances that varies the terms of an offer creates several conceptual and practical issues. The problems are not that the parties have paid inadequate attention to their contract, but that legal concepts must be fitted to a setting in which commercial practice does not necessarily focus on the details of conformance between an offer and an acceptance. In such unstructured settings, the purpose of the rules of contract formation and the rules that determine the terms of an agreement is to provide fair guidance that corresponds to the type of commercial issues that must be resolved in this open or unstructured environment.

3. Varying Terms: Material Variance. One issue, addressed in subsection (b), concerns how courts distinguish cases of a contract formed by a varying acceptance and cases where the variance indicates that no contract can reasonably be said to be formed by the offer and acceptance alone. Consistent with Section 2B-202, material variance, either a conflict with a material term or a material modification of the offer, precludes formation based on the purported acceptance. This reflects the basic policy that a contract requires a meeting of the minds; it is an underlying premise of existing Article 2 rules, although not specifically stated in that statute. The rule protects both parties in that it precludes the formation of a contract when a material disagreement about terms exists. What constitutes a material term or a material alteration of the offer depends on the context, including what the parties might reasonably expect to find in contracts in light of applicable trade use and course of dealing. Comments to Section 2-207 contains a list of what the drafters then thought would be material, but that list may or may not be applicable in modern commerce. In licensing, however, scope is always a material term since it defines the focus of the contract itself.

The rule does not preclude formation of a contract other than through the offer and purported acceptance. It allows contract formation by conduct or through a showing of other circumstances indicating agreement, even if the formal offer and acceptance materially diverge. This is spelled out in subsection (b)(1). The circumstances adequate to show agreement despite material conflict in the records exchanged by the parties as a purported offer and acceptance correspond to the broad concept of contract formation outlined in Section 2B-202. The relevant standard contemplates an inclusive, rather than limited consideration of relevant circumstances.

If a contract is formed based on the circumstances, the important issues center on what terms are applicable to the contract. By hypothesis, the records exchanged as an offer and acceptance materially diverge. Subsection (b)(1) contemplates two distinct approaches to determining the terms of the contract. The first arises if one party agreed to the terms of the other. In that case, the terms, if in a record, are adopted pursuant to and subject to the limitations in Section 2B-207 and 2B-208. The agreement to these terms can be manifested in any manner that is relevant except that it cannot be found solely in the "acceptance" that contains a materially varying term. thus, for example, if the parties exchange records that contain a material conflict, but one calls the other and agrees to either the other party's form or to otherwise delineated terms, the contract forms around those terms.

The second circumstance is where the exchanged offer and acceptance materially conflict, but a contract is formed by conduct. This places the relationship under Section 2B-209. That Section requires a court to apply general interpretation rules to discerning the terms that are part of the contract, unless the cases involves conflicting standard forms. In that latter situation, Section 2B-209 applies a "knock out" rule modeled on current Section 2B-209.

4. Varying Terms: Non-Material Variance. If the offer and acceptance do not materially vary, they form a contract. Subsection (b)(2) indicates that, as under general contract law and current Article 2, the terms of the contract are the terms of the accepted offer. Subsection (b)(2), however, also allows for the introduction of non-material additional terms from the acceptance unless the offeror timely objects to those terms. This rule is taken from existing Article 2. It does not apply to terms that provide conflicting treatment of the same subject matter. Where the offer and acceptance conflict on a term and the conflict or term is not material, the contract is governed by the terms of the accepted offer.

5. Conditional Offers and Acceptances. As recognized in subsection (c), as a matter of general contract law, a person has a right to state preconditions for its offer or its acceptance. The most common conditional offer or acceptance is one that conditions its effect on adherence to its own contractual terms. In effect, read literally, these conditional offers or acceptances state: "there is no contract except on the terms and conditions that I propose." There is no principle in contract law that would generally preclude a party from engaging is such conditional offers or acceptances and being able to rely on the conditional terms.

Subsection (c) recognizes that these conditional statements are entitled to recognition. Subsection (c)(2) provides the necessary corollary to this proposition. Agreement to the terms of a conditional offer or acceptance by the other party creates a contract based on the terms of that conditional offer or acceptance.

While language of condition should generally be acknowledged and enforced by courts, use of conditional language in standard form offers and acceptances creates special problems. The typical scenario occurs in a traditional "battle of forms" transaction in which either or both parties make the acceptance or offer expressly conditional on adherence to its specific contractual terms, but nevertheless proceed to engage in performance recognizing a contract irrespective of any acceptance of the terms of condition. Subsection (c) treats this as a question involving the effectiveness of the conditional language. There are three scenarios where forms are exchanged that contain varying terms and one or both contains conditional language limiting their legal effect in forming a contract to the condition that the other party accept all of the stated terms.

In the first, the party receiving the conditional form is contacted by the other party and assents to the conditions. Under these circumstances, the terms of the agreed to form govern the contract that was created.

In the second, nothing more happens other than the exchange of forms (e.g., no performance and no acceptance of a form by the other party), no contract exists. Since there is no performance, the behavior of the party stating the condition is consistent with that condition and the standard form cannot form a contract unless it is accepted by the other. No contract exists.

In the third, both parties proceed to perform recognizing the existence of a contract. Under current Article 2 law, it is not clear how this situation would be examined in the case where one of the parties' forms was conditional. Some would argue that the performance of the one accepts the conditional terms of the other. Other courts reject that analysis. Under subsection (c)(2), the fact that the person tendering the conditional form performed as it there were an agreement renders the conditional language ineffective. To be effective language of condition in a standard form, the party's behavior must be consistent with the conditions. Thus, the situation is shifted to a simple exchange of forms containing varying terms.

Illustration 1. Purchaser sends a standard order form indicating that its order is conditional on the Licensor's assent to terms on the form. Licensor ships with an invoice conditioning the contract on assent to its terms. Purchaser accepts shipment. Here, neither party acted consistent with the language of condition. A contract exists, however, based on conduct (e.g., shipment and acceptance). The terms are governed by 2B-209; the conflicting terms drop out.

Illustration 2. In Illustration 1, assume that Licensor refuses to ship, but informs Purchaser of the conditions of shipment. It does not ship until Purchaser agrees to terms. Until that occurs, there is no contract. If it occurs, the contract exists based on terms actually agreed to (e.g., the Licensor's terms). See 2B-209 regarding the superseding effect of actually conditional offers.

Illustration 3. In Illustration 1, assume Licensor ships pursuant to a "conditional" form, but when the shipment arrives, Purchaser refuses it because its original conditional terms are changed. In a telephone conversation, Licensor agrees to Purchaser's terms. Until that agreement, there is no contract; Purchaser acted in a manner consistent with its conditional language. When agreement occurred, that agreement sets the terms of the contract (e.g., the Purchaser's terms) the conflicting forms no longer purport to state the contract of the parties.