Flender Corp. v. Tippins International, Inc.
51 U.C.C. Rep. Serv. 2d (West) 68, 830 A.2d 1279, 2003 Pa. Super. 300 (2003)
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Rule of Law:
Under Pennsylvania's Uniform Commercial Code § 2-207, when an offer and an acceptance in a commercial transaction contain different or conflicting terms, those terms cancel each other out and do not become part of the contract. The contract consists of the terms on which the parties' writings agree, supplemented by any applicable UCC gap-filler provisions.
Facts:
- Tippins International, Inc. was constructing a steel rolling mill in the Czech Republic and sought to purchase gear drive assemblies from Flender Corporation.
- In January 1998, Tippins sent a purchase order to Flender that expressly limited acceptance to its own terms.
- Tippins's purchase order included a clause requiring all disputes to be submitted to arbitration before the International Chamber of Commerce in Vienna, Austria, governed by Austrian law.
- The purchase order also specified that a particular acknowledgment form 'MUST' be signed and returned to constitute acceptance.
- Flender did not sign or return Tippins's acknowledgment form.
- Instead, Flender manufactured and shipped the gear drive assemblies to Tippins.
- Flender's invoice, which accompanied the shipment, contained its own 'Conditions of Sale' which provided that exclusive jurisdiction for any dispute would be in the state or federal courts located in Chicago, Illinois.
- Tippins accepted and installed the gear drives but subsequently failed to pay the full balance due on the shipment.
Procedural Posture:
- Flender Corporation sued Tippins International, Inc. in the Court of Common Pleas of Allegheny County, a state trial court, to recover an outstanding payment.
- Tippins filed preliminary objections to the complaint, asking the court to compel arbitration in Vienna, Austria, as required by its purchase order.
- The trial court denied Tippins's objections, concluding that the conflicting dispute resolution clauses knocked each other out and that the parties formed a contract by conduct which did not include an arbitration agreement.
- Tippins filed an interlocutory appeal of right from the trial court's order to the Superior Court of Pennsylvania, an intermediate appellate court.
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Issue:
Does an arbitration clause in a buyer's purchase order become part of the contract under UCC § 2-207 when the seller's responding invoice contains a conflicting forum selection clause?
Opinions:
Majority - Johnson, J.
No, the arbitration clause does not become part of the contract. When an offer and acceptance contain conflicting terms, those terms are 'knocked out' under UCC § 2-207. The court began by finding that the parties had formed a written contract under § 2207(a) because Flender's invoice was a 'definite and seasonable expression of acceptance,' even though it contained different terms and was not expressly conditional on Tippins's assent to them. The central question was how to treat the 'different' terms regarding dispute resolution. The court analyzed the split in authority, contrasting the minority view (which treats 'different' terms like 'additional' terms under § 2207(b), often resulting in the offeror's terms prevailing) with the majority 'knockout rule.' Adopting the knockout rule as the law in Pennsylvania, the court reasoned it is more equitable and consistent with the purpose of § 2207, which is to repudiate the common law 'mirror-image' rule and prevent the offeror from always prevailing simply by sending the first form. Applying this rule, Tippins's arbitration clause and Flender's conflicting forum selection clause were both 'knocked out' of the contract. The resulting contract was silent on dispute resolution, leaving no basis to compel arbitration.
Analysis:
This decision formally adopts the majority 'knockout rule' for resolving 'battle of the forms' disputes under UCC § 2-207 in Pennsylvania, aligning the state with the prevailing interpretation across the country. By doing so, the court clarifies that 'different' terms are treated distinctly from 'additional' terms, preventing the offeror's terms from automatically controlling when the acceptance contains a conflicting provision. This ruling provides greater predictability in commercial law and promotes equity by not privileging the party who sent the first form, instead forming a contract based on the terms the parties genuinely agreed upon.
