Opinion ID: 564982
Heading Depth: 2
Heading Rank: 2

Heading: Application of Sec. 2-207

Text: 33 TSL advances several reasons why the terms of the box-top license should be incorporated into the parties's agreement under a Sec. 2-207 analysis. First, TSL argues that the parties's contract was not formed until Step-Saver received the package, saw the terms of the box-top license, and opened the package, thereby consenting to the terms of the license. TSL argues that a contract defined without reference to the specific terms provided by the box-top license would necessarily fail for indefiniteness. Second, TSL argues that the box-top license was a conditional acceptance and counter-offer under Sec. 2-207(1). Third, TSL argues that Step-Saver, by continuing to order and use the product with notice of the terms of the box-top license, consented to the terms of the box-top license. 34
35 TSL argues that the parties intended to license the copies of the program, and that several critical terms could only be determined by referring to the box-top license. Pressing the point, TSL argues that it is impossible to tell, without referring to the box-top license, whether the parties intended a sale of a copy of the program or a license to use a copy. TSL cites Bethlehem Steel Corp. v. Litton Industries in support of its position that any contract defined without reference to the terms of the box-top license would fail for indefiniteness. 21 36 From the evidence, it appears that the following terms, at the least, were discussed and agreed to, apart from the box-top license: (1) the specific goods involved; (2) the quantity; and (3) the price. TSL argues that the following terms were only defined in the box-top license: (1) the nature of the transaction, sale or license; and (2) the warranties, if any, available. TSL argues that these two terms are essential to creating a sufficiently definite contract. We disagree. Section 2-204(3) of the UCC provides: 37 Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. 38 Unlike the terms omitted by the parties in Bethlehem Steel Corp., the two terms cited by TSL are not gaping holes in a multi-million dollar contract that no one but the parties themselves could fill. 22 First, the rights of the respective parties under the federal copyright law if the transaction is characterized as a sale of a copy of the program are nearly identical to the parties's respective rights under the terms of the box-top license. 23 Second, the UCC provides for express and implied warranties if the seller fails to disclaim expressly those warranties. 24 Thus, even though warranties are an important term left blank by the parties, the default rules of the UCC fill in that blank. 39 We hold that contract was sufficiently definite without the terms provided by the box-top license. 25 40
41 TSL advances two reasons why its box-top license should be considered a conditional acceptance under UCC Sec. 2-207(1). First, TSL argues that the express language of the box-top license, including the integration clause and the phrase opening this product indicates your acceptance of these terms, made TSL's acceptance expressly conditional on assent to the additional or different terms. 26 Second, TSL argues that the box-top license, by permitting return of the product within fifteen days if the purchaser 27 does not agree to the terms stated in the license (the refund offer), establishes that TSL's acceptance was conditioned on Step-Saver's assent to the terms of the box-top license, citing Monsanto Agricultural Products Co. v. Edenfield. 28 While we are not certain that a conditional acceptance analysis applies when a contract is established by performance, 29 we assume that it does and consider TSL's arguments. 42 To determine whether a writing constitutes a conditional acceptance, courts have established three tests. Because neither Georgia nor Pennsylvania has expressly adopted a test to determine when a written confirmation constitutes a conditional acceptance, we consider these three tests to determine which test the state courts would most likely apply. 30 43 Under the first test, an offeree's response is a conditional acceptance to the extent it states a term materially altering the contractual obligations solely to the disadvantage of the offeror. 31 Pennsylvania, at least, has implicitly rejected this test. In Herzog Oil Field Service, Inc., 32 a Pennsylvania Superior Court analyzed a term in a written confirmation under UCC Sec. 2-207(2), rather than as a conditional acceptance even though the term materially altered the terms of the agreement to the sole disadvantage of the offeror. 33 44 Furthermore, we note that adopting this test would conflict with the express provision of UCC Sec. 2-207(2)(b). Under Sec. 2-207(2)(b), additional terms in a written confirmation that materially alter [the contract] are construed as proposals for addition to the contract, not as conditional acceptances. 45 A second approach considers an acceptance conditional when certain key words or phrases are used, such as a written confirmation stating that the terms of the confirmation are the only ones upon which we will accept orders. 34 The third approach requires the offeree to demonstrate an unwillingness to proceed with the transaction unless the additional or different terms are included in the contract. 35 46 Although we are not certain that these last two approaches would generate differing answers, 36 we adopt the third approach for our analysis because it best reflects the understanding of commercial transactions developed in the UCC. Section 2-207 attempts to distinguish between: (1) those standard terms in a form confirmation, which the party would like a court to incorporate into the contract in the event of a dispute; and (2) the actual terms the parties understand to govern their agreement. The third test properly places the burden on the party asking a court to enforce its form to demonstrate that a particular term is a part of the parties's commercial bargain. 37 47 Using this test, it is apparent that the integration clause and the consent by opening language is not sufficient to render TSL's acceptance conditional. As other courts have recognized, 38 this type of language provides no real indication that the party is willing to forego the transaction if the additional language is not included in the contract. 48 The second provision provides a more substantial indication that TSL was willing to forego the contract if the terms of the box-top license were not accepted by Step-Saver. On its face, the box-top license states that TSL will refund the purchase price if the purchaser does not agree to the terms of the license. 39 Even with such a refund term, however, the offeree/counterofferor may be relying on the purchaser's investment in time and energy in reaching this point in the transaction to prevent the purchaser from returning the item. Because a purchaser has made a decision to buy a particular product and has actually obtained the product, the purchaser may use it despite the refund offer, regardless of the additional terms specified after the contract formed. But we need not decide whether such a refund offer could ever amount to a conditional acceptance; the undisputed evidence in this case demonstrates that the terms of the license were not sufficiently important that TSL would forego its sales to Step-Saver if TSL could not obtain Step-Saver's consent to those terms. 49 As discussed, Mr. Greebel testified that TSL assured him that the box-top license did not apply to Step-Saver, as Step-Saver was not the end user of the Multilink Advanced program. Supporting this testimony, TSL on two occasions asked Step-Saver to sign agreements that would put in formal terms the relationship between Step-Saver and TSL. Both proposed agreements contained warranty disclaimer and limitation of remedy terms similar to those contained in the box-top license. Step-Saver refused to sign the agreements; nevertheless, TSL continued to sell copies of Multilink Advanced to Step-Saver. 50 Additionally, TSL asks us to infer, based on the refund offer, that it was willing to forego its sales to Step-Saver unless Step-Saver agreed to the terms of the box-top license. Such an inference is inconsistent with the fact that both parties agree that the terms of the box-top license did not represent the parties's agreement with respect to Step-Saver's right to transfer the copies of the Multilink Advanced program. Although the box-top license prohibits the transfer, by Step-Saver, of its copies of the program, both parties agree that Step-Saver was entitled to transfer its copies to the purchasers of the Step-Saver multi-user system. Thus, TSL was willing to proceed with the transaction despite the fact that one of the terms of the box-top license was not included in the contract between TSL and Step-Saver. We see no basis in the terms of the box-top license for inferring that a reasonable offeror would understand from the refund offer that certain terms of the box-top license, such as the warranty disclaimers, were essential to TSL, while others such as the non-transferability provision were not. 51 Based on these facts, we conclude that TSL did not clearly express its unwillingness to proceed with the transactions unless its additional terms were incorporated into the parties's agreement. The box-top license did not, therefore, constitute a conditional acceptance under UCC Sec. 2-207(1). 52
53 parties had excluded any express or implied 54 warranties associated with the software program? 55 TSL argues that because Step-Saver placed its orders for copies of the Multilink Advanced program with notice of the terms of the box-top license, Step-Saver is bound by the terms of the box-top license. Essentially, TSL is arguing that, even if the terms of the box-top license would not become part of the contract if the case involved only a single transaction, the repeated expression of those terms by TSL eventually incorporates them within the contract. 56 Ordinarily, a course of dealing or course of performance analysis focuses on the actions of the parties with respect to a particular issue. 40 If, for example, a supplier of asphaltic paving material on two occasions gives a paving contractor price protection, a jury may infer that the parties have incorporated such a term in their agreement by their course of performance. 41 Because this is the parties's first serious dispute, the parties have not previously taken any action with respect to the matters addressed by the warranty disclaimer and limitation of liability terms of the box-top license. Nevertheless, TSL seeks to extend the course of dealing analysis to this case where the only action has been the repeated sending of a particular form by TSL. While one court has concluded that terms repeated in a number of written confirmations eventually become part of the contract even though neither party ever takes any action with respect to the issue addressed by those terms, 42 most courts have rejected such reasoning. 43 57 For two reasons, we hold that the repeated sending of a writing which contains certain standard terms, without any action with respect to the issues addressed by those terms, cannot constitute a course of dealing which would incorporate a term of the writing otherwise excluded under Sec. 2-207. First, the repeated exchange of forms by the parties only tells Step-Saver that TSL desires certain terms. Given TSL's failure to obtain Step-Saver's express assent to these terms before it will ship the program, Step-Saver can reasonably believe that, while TSL desires certain terms, it has agreed to do business on other terms--those terms expressly agreed upon by the parties. Thus, even though Step-Saver would not be surprised 44 to learn that TSL desires the terms of the box-top license, Step-Saver might well be surprised to learn that the terms of the box-top license have been incorporated into the parties's agreement. 58 Second, the seller in these multiple transaction cases will typically have the opportunity to negotiate the precise terms of the parties's agreement, as TSL sought to do in this case. The seller's unwillingness or inability to obtain a negotiated agreement reflecting its terms strongly suggests that, while the seller would like a court to incorporate its terms if a dispute were to arise, those terms are not a part of the parties's commercial bargain. For these reasons, we are not convinced that TSL's unilateral act of repeatedly sending copies of the box-top license with its product can establish a course of dealing between TSL and Step-Saver that resulted in the adoption of the terms of the box-top license. 59 With regard to more specific evidence as to the parties's course of dealing or performance, it appears that the parties have not incorporated the warranty disclaimer into their agreement. First, there is the evidence that TSL tried to obtain Step-Saver's express consent to the disclaimer and limitation of damages provision of the box-top license. Step-Saver refused to sign the proposed agreements. Second, when first notified of the problems with the program, TSL spent considerable time and energy attempting to solve the problems identified by Step-Saver. 60 Course of conduct is ordinarily a factual issue. But we hold that the actions of TSL in repeatedly sending a writing, whose terms would otherwise be excluded under UCC Sec. 2-207, cannot establish a course of conduct between TSL and Step-Saver that adopted the terms of the writing. 61
62 TSL has raised a number of public policy arguments focusing on the effect on the software industry of an adverse holding concerning the enforceability of the box-top license. We are not persuaded that requiring software companies to stand behind representations concerning their products will inevitably destroy the software industry. We emphasize, however, that we are following the well-established distinction between conspicuous disclaimers made available before the contract is formed and disclaimers made available only after the contract is formed. 45 When a disclaimer is not expressed until after the contract is formed, UCC Sec. 2-207 governs the interpretation of the contract, and, between merchants, such disclaimers, to the extent they materially alter the parties's agreement, are not incorporated into the parties's agreement. 63 If TSL wants relief for its business operations from this well-established rule, their arguments are better addressed to a legislature than a court. Indeed, we note that at least two states have enacted statutes that modify the applicable contract rules in this area, 46 but both Georgia and Pennsylvania have retained the contract rules provided by the UCC.