Battle of the Forms in Minnesota: Whose Terms Govern?

How does Minnesota law decide whose terms govern a sale of goods?

Minnesota decides whose terms govern a sale of goods mainly under Minn. Stat. § 336.2-207, once the ordinary offer-and-acceptance rules have decided which form is the offer. Subsection (1) treats a reply as an acceptance even when the paperwork does not match: a “definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.” Mismatched forms usually still create a contract, and the dispute is over which terms are in it.

The rule covers goods, because Article 2 “applies to transactions in goods,” with a separate test for hybrid transactions, under Minn. Stat. § 336.2-102(1). A hybrid transaction is a single transaction that combines a sale of goods with the provision of services, a lease of other goods, or a sale, lease, or license of property other than goods, under Minn. Stat. § 336.2-106(5). Under Minn. Stat. § 336.2-102(2), if the sale-of-goods aspects predominate, Article 2 “applies to the transaction,” though other law may apply in appropriate circumstances to aspects unrelated to the sale of goods; if not, only Article 2’s provisions “which relate primarily to the sale-of-goods aspects of the transaction apply.”

The rule sits within Minnesota’s version of UCC Article 2 and broader Minnesota contract law. International sales can fall outside it: in Travelers Property Casualty Co. of America v. Saint-Gobain Technical Fabrics Canada Ltd., 474 F. Supp. 2d 1075 (D. Minn. 2007), a federal court applied the United Nations Convention on Contracts for the International Sale of Goods (“CISG”) to a Minnesota company’s purchase from a Canadian supplier, even though the purchase order chose Minnesota law.

What counts as the offer: the seller’s quote or the buyer’s purchase order?

Under Minnesota law, the buyer’s purchase order is usually the offer, and the seller’s quote is only an invitation to make one. Restating Minnesota law in Ballou v. Asset Marketing Services, LLC, 46 F.4th 844 (8th Cir. 2022), the Eighth Circuit said that a quoting vendor “makes an invitation for the recipient to make an offer,” while “the buyer makes an offer” when it places a purchase order.

The offer frames the deal. In Litton Microwave Cooking Products v. Leviton Manufacturing Co., 15 F.3d 790 (8th Cir. 1994), applying Minnesota law, a supplier attached its standard terms, including a repair-or-replace warranty and a consequential-damages exclusion, to every price letter, but “price quotes and catalogs generally are not offers to form a contract,” so “the terms of Litton’s purchase order govern the relationship in question.”

A quote can be the offer when it is “clear, definite and explicit, and leaves nothing open for negotiation,” the Minnesota test Litton applied. In White Consolidated Industries, Inc. v. McGill Manufacturing Co., 165 F.3d 1185 (8th Cir. 1999), also decided under Minnesota law, a quote “subject to immediate acceptance” qualified because it “was sufficiently detailed and indicated that acceptance was all that was needed to ripen the offer into a contract.”

When do added terms in the other side’s form become part of the contract?

Added terms in an acceptance or written confirmation are only proposals, and between merchants they become part of the contract unless one of three exceptions applies. The other side’s extra terms therefore join the deal on their own only when both sides are merchants and no exception fits. Under Minn. Stat. § 336.2-207(2), “additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless”:

• “The offer expressly limits acceptance to the terms of the offer;”
• “They materially alter it; or”
• “Notification of objection to them has already been given or is given within a reasonable time after notice of them is received.”

A transaction is “between merchants” when “both parties are chargeable with the knowledge or skill of merchants,” and a merchant is “a person who deals in goods of the kind or otherwise by occupation holds out as having knowledge or skill peculiar to the practices or goods involved in the transaction,” or one to whom that knowledge or skill may be attributed because it employs an agent, broker, or other intermediary who by occupation holds out as having it, under Minn. Stat. § 336.2-104(1) and (3). That covers a supplier and a retailer that resells its products. When either side is not a merchant, an added term stays a proposal unless the party receiving it agrees. In Lemmer v. IDS Properties, Inc., 304 N.W.2d 864 (Minn. 1980), a building owner that “is not a merchant of scaffolding” was not bound by a hold-harmless clause on the scaffolding supplier’s delivery order; the court found no evidence that the owner dealt in scaffolding, claimed special knowledge or skill in scaffolding transactions, or acted through an agent that qualified as a merchant.

What makes a term a material alteration under Minnesota law?

A term materially alters the deal when it would “result in surprise or hardship if incorporated without express awareness by the other party,” the test the Minnesota Court of Appeals applied in TRWL Financial Establishment v. Select International, Inc., 527 N.W.2d 573 (Minn. Ct. App. 1995), calling materiality “a question of fact which must be resolved on a case by case basis.” Three decisions show the test at work:

• In TRWL, a buyer confirmed a phone deal with a purchase order whose forum-selection clause was “the last of 18 fine print boilerplate contract terms.” Although the seller shipped without objecting, the clause “materially altered the parties’ agreement as a matter of law,” and the court added that “Boilerplate contract terms that are unreadable or illegible are invalid.”
• In Marvin Lumber & Cedar Co. v. PPG Industries, Inc., 401 F.3d 901 (8th Cir. 2005), applying Minnesota law, fine print on 66 unsigned acknowledgments purported to cap the seller’s liability at the $1.6 million purchase price. Because the cap was never negotiated, sat in small print on the back of a dense form, and shifted the brunt of a product failure to the buyer, it “did not become a part of the contract . . . and is not enforceable.”
• In N & D Fashions, Inc. v. DHJ Industries, Inc., 548 F.2d 722 (8th Cir. 1976), involving a Minnesota buyer, the materiality of an added arbitration clause was “a question of fact to be resolved by the circumstances of each particular case.”

Unless the other side expressly agrees to it, a cap or dispute clause that first appears in an acknowledgment has to survive this test before the rules on limitation-of-liability clauses or when Minnesota enforces an arbitration clause apply.

How does Minnesota treat terms that directly conflict?

Minnesota law has not settled what happens when two forms contain directly conflicting terms, such as two different warranties. Subsection (2) of Minn. Stat. § 336.2-207 speaks only of “additional terms,” and in White Consolidated the Eighth Circuit, applying Minnesota law, wrote: “We do not decide in this case the much debated question of whether UCC § 2-207(2) provides for the treatment of additional and different terms or only additional terms.” No published Minnesota appellate decision has resolved it.

The official comment to the uniform statute says that conflicting clauses on the confirming forms both parties send “do not become a part of the contract.” A Minnesota federal court quoted that comment in Oskey Gasoline & Oil Co. v. OKC Refining Inc., 364 F. Supp. 1137 (D. Minn. 1973) but declined to decide the point, and comments are not law: Marvin noted that “the commentary does not have the force of law.” I suggest settling any conflict over a term that matters, such as a warranty, a liability cap, payment, or where lawsuits are filed, in a signed document, because the answer is unsettled.

How does an expressly conditional acceptance change the outcome?

An acceptance “expressly made conditional on assent to the additional or different terms” does not operate as an acceptance under Minn. Stat. § 336.2-207(1), so the forms create no contract unless the other side agrees to those terms. As White Consolidated put it, applying Minnesota law, “If an acceptance is conditioned on assent to new terms, and assent is not forthcoming, the transaction aborts.”

Often both sides ship and pay anyway, and Minn. Stat. § 336.2-207(3) then supplies the contract: “Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale,” on “those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this chapter.” Those terms usually include the implied warranty of merchantability, which Minn. Stat. § 336.2-314(1) implies, unless excluded or modified, “if the seller is a merchant with respect to goods of that kind.” The broader rules on express and implied warranties then decide what the seller owes.

In White Consolidated, the buyer’s purchase order accepted the supplier’s quote only on the express condition that the supplier agree the purchase order was the entire agreement. The supplier changed the price before signing, so the shipments formed a contract under subsection (3), with “the terms for the warranties, determined by other provisions of the UCC.”

When a seller’s acknowledgment is expressly conditional, the buyer’s silence, or its mere acceptance of and payment for the goods, is not assent to the seller’s terms. In PCS Nitrogen Fertilizer, L.P. v. Christy Refractories, L.L.C., 225 F.3d 974 (8th Cir. 2000), applying the same uniform text under another state’s law, a buyer that took and paid for goods had not accepted a seller’s expressly conditional acknowledgment, because “mere acceptance of and payment for goods does not constitute acceptance of all the terms in the seller’s counter-offer.” The court required “specific and affirmative assent” to the seller’s counter-offer. The Eighth Circuit applied the same requirement under Minnesota law in Ballou.

When does signing, clicking, or receiving goods bind you to the other side’s terms?

For a term that needs the company’s agreement (a material added term, or any added term when either side is not a merchant), signing, clicking, or receiving goods binds the company only when the act shows agreement by someone with actual or apparent authority to give it. Immaterial added terms between merchants need no act at all: they join the contract unless an exception in Minn. Stat. § 336.2-207(2), such as a timely objection, applies. A signature under language incorporating the other side’s terms counts, while a receiving-dock signature, silence, and an unanswered email generally do not. An authorized click in a vendor portal can count as assent too, and Minn. Stat. § 325L.07(b) keeps its electronic form from defeating the contract: a contract “may not be denied legal effect or enforceability solely because an electronic record was used in its formation.”

In N & D Fashions, the buyer’s purchasing agent signed and returned acknowledgment forms stating, just above the signature, “THIS CONTRACT IS SUBJECT TO ALL THE TERMS AND CONDITIONS PRINTED ON THE REVERSE SIDE,” and the arbitration clause on the back bound the buyer because, absent fraud, misrepresentation, or deceit, a party “cannot avoid the effect of his written acceptance.” In Lemmer, by contrast, a building superintendent with no authority to agree to new terms signed a delivery order at the loading dock, and the Minnesota Supreme Court held that “signing the delivery order merely acknowledged receipt of the goods.”

Authority includes apparent authority. In N & D Fashions, the buyer said its purchasing agent’s express authority stopped at color, quantity, type, price, and delivery terms. The court held that as purchasing agent he “had at least apparent authority to enter any agreements reasonably necessary to the sale, including an arbitration agreement.” Absent any contrary expression from the buyer, the seller was entitled to rely on that authority. In Lemmer, the superintendent had not been in contact with the supplier, so the supplier “had no basis for believing he had authority to consent to proposals for additions to the contract.”

In Grandoe Corp. v. Gander Mountain Co., 761 F.3d 876 (8th Cir. 2014), a national retailer headquartered in St. Paul posted a vendor buying agreement (“VBA”) on its website and emailed the supplier about it, and the supplier never replied. Applying the Minnesota rule that “Ordinarily, mere silence does not amount to an acceptance,” the court found it unreasonable to infer assent from that silence. The parties had relied on oral commitments for years, and the new terms “fundamentally changed the way the parties did business.” The court added that silence might support such an inference for a change to only “the ancillary terms of the parties’ arrangement.” On the retailer’s other theory, the question was “whether the purchase orders . . . incorporate the VBA.” The retailer bore the burden of proving the VBA applied but never put its purchase orders in evidence, and the supplier’s jury verdict of $1,557,284.40 stood.

An authorized click is different. Minnesota’s Uniform Electronic Transactions Act (“UETA”) applies only when each party has agreed to transact electronically, an agreement judged “from the context and surrounding circumstances, including the parties’ conduct,” under Minn. Stat. § 325L.05(b). Under Minn. Stat. § 325L.02(b), an automated transaction is one conducted or performed at least partly by electronic means or records “in which the acts or records of one or both parties are not reviewed by an individual in the ordinary course in forming a contract, performing under an existing contract, or fulfilling an obligation required by the transaction.” A vendor portal qualifies when no one at the retailer reviews a supplier’s acceptance in the ordinary course.

In an automated transaction, UETA lets a contract form when an individual “performs actions that the individual is free to refuse to perform and which the individual knows or has reason to know will cause the electronic agent to complete the transaction,” Minn. Stat. § 325L.14(2). Section 325L.14(3) leaves the terms to “the substantive law applicable to it,” so ordinary contract and UCC rules, including the battle-of-the-forms rule where forms conflict, decide what a click accepts. Portal acceptance often works like clickwrap terms in business-to-business deals.

In my practice, the more useful question about email is whether routine messages are forming or changing contracts without anyone intending it, so I suggest reading the other side’s form against your own before anyone signs it or accepts it by email.

How can a Minnesota supplier make its terms of sale stick?

A Minnesota supplier gives its terms the best chance of governing by making its quote the offer, limiting acceptance to the quote’s terms, and objecting in advance to the buyer’s additions, all on the face of the document. Under Minn. Stat. § 336.2-207(2)(a) and (c), a buyer’s added terms stay out when “The offer expressly limits acceptance to the terms of the offer” or when “Notification of objection to them has already been given.” Four drafting choices follow:

1. The quote can state the goods, quantity, price, and delivery terms and say it is “subject to immediate acceptance.” White Consolidated found a quote “subject to immediate acceptance” sufficiently detailed to be an offer, without the open delivery and quantity questions that kept the Litton quote from being one. The tradeoff is that an offer binds the supplier once the buyer accepts it. Litton tested Leviton’s price letters by asking whether the buyer could, “based on the quotation letters alone,” hold Leviton “in breach of contract if Leviton were to be unable to fill any purchase order submitted.” I suggest that a quote meant to be an offer state only quantities and delivery dates the supplier can honor, and say how long the quote stays open.
2. The quote can limit acceptance to its own terms and object in advance to any additional or different terms in the buyer’s purchase order. The vendor’s quote in Jostens, Inc. v. National Computer System, Inc., 318 N.W.2d 691 (Minn. 1982) limited acceptance this way, and the buyer’s added proprietary clause never became part of the contract.
3. The key terms can sit on the face in readable type, because TRWL held an illegible boilerplate clause unenforceable and Marvin counted back-of-form fine print as a source of surprise.
4. New terms can stay off the invoice. An invoice sent after an order is placed and accepted orally, such as by phone, is a written confirmation, as the shipping invoices in Ballou and the delivery order in Lemmer were. Unless it expressly makes acceptance conditional on the buyer’s assent to its added terms, those terms are only proposals. Between merchants, a material one stays out unless the buyer agrees, and an immaterial one joins the contract unless the buyer objected in advance or within a reasonable time after notice of it, or its order expressly limited acceptance to its own terms. Ballou and Lemmer, both involving buyers that were not merchants, show the proposal rule. Later invoices in Ballou said the seller was “willing to sell its product(s) to you only if you accept all of our Terms and Conditions.” The court found a genuine issue of material fact whether that “expressly conditional invoice language created binding contracts” on the seller’s full terms.

The buyer’s own expressly conditional form can still push the deal into Minn. Stat. § 336.2-207(3): in White Consolidated, the supplier’s quote was a valid offer, yet its warranty limits gave way to the code’s defaults.

Warranty disclaimers and remedy limits face two more tests. Under Minn. Stat. § 336.2-316(2), a merchantability disclaimer “must mention merchantability and in case of a writing must be conspicuous,” meaning, under Minn. Stat. § 336.1-201(b)(10), that “based on the totality of circumstances, a reasonable person against which it is to operate ought to have noticed it.” Under Minn. Stat. § 336.2-316(3)(a), “unless the circumstances indicate otherwise,” all implied warranties are excluded, even without mentioning merchantability, by expressions like “as is” or “with all faults,” or by other language that, in common understanding, calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty.

Minn. Stat. § 325G.18 gives every consumer sale of new goods in Minnesota an implied warranty of merchantability and, where applicable, of fitness, “Unless disclaimed in the manner prescribed in subdivision 2.” Under that subdivision, a disclaimer works only if a conspicuous writing clearly informs the buyer before the sale, in simple and concise language, that the goods are sold “as is” or “with all faults.” The same writing must tell the buyer that the entire risk as to the goods’ quality and performance is with the buyer. For a mail-order catalog sale, the catalog may contain that writing instead of notice before the sale.

Federal law can close that route: under 15 U.S.C. § 2308(a), a supplier that gives a consumer a written warranty on a consumer product, or enters into a service contract covering it with the consumer “at the time of sale, or within 90 days thereafter,” may not disclaim or modify any implied warranty to a consumer on that product. Subsection (b) allows, at most, a limit on an implied warranty’s duration, and only on the conditions it sets, and subsection (c) makes a disclaimer, modification, or limitation that violates the section ineffective for purposes of the federal warranty act and state law.

Under Minn. Stat. § 336.2-719(3), consequential damages “may be limited or excluded unless the limitation or exclusion is unconscionable,” and a limit on commercial losses is not presumed unconscionable. The same subsection adds that “Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable.” Under Minn. Stat. § 336.2-719(2), “Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this chapter,” so the buyer may then use the code’s other remedies. A separate exclusion of consequential damages can survive that failure: in International Financial Services, Inc. v. Franz, 534 N.W.2d 261 (Minn. 1995), a sale of complex equipment between merchants of relatively equal bargaining power, the exclusion stayed “valid and enforceable” after the repair-or-replace remedy failed.

Both tests matter only if the term made it into the contract, which is where the Marvin cap failed. A retailer’s signed vendor agreement moves that negotiation into the agreement itself, the subject of a national retailer’s vendor contract and of vendor contract risk planning.

How can a Minnesota buyer make its purchase order terms stick?

A Minnesota buyer gives its purchase order terms the best chance of governing by keeping the purchase order as the offer and using the same two tools Minn. Stat. § 336.2-207(2)(a) and (c) give a seller: limiting acceptance to its terms and objecting in advance to a supplier’s additions. The buyer also incorporates its standard terms by reference, with a statement that shipment accepts them, and ties any portal terms to each order.

General Mills Operations, LLC v. Five Star Custom Foods, Ltd., 789 F. Supp. 2d 1148 (D. Minn. 2011) shows the incorporation step. The purchase order said on its face that the buyer’s standard terms governed and that “Shipment of the goods against this order constitutes acceptance of terms and conditions” of a stated date. The supplier said it never received the terms, but the court held that the purchase order “incorporated the Terms and Conditions by reference,” leaving the supplier “responsible to obtain and become familiar with them,” and that years under the same terms ruled out unfair surprise.

Posting portal or vendor-manual terms does not by itself bind a supplier, at least when the change is as fundamental as the one in Grandoe. There the question was whether the supplier accepted the new terms or the purchase orders incorporated them, so an authorized click or signature matters. One caution: a purchase order drafted as an expressly conditional acceptance can leave the buyer with the code’s default terms in place of its own, as in White Consolidated, where the warranty terms came from the code rather than from the buyer’s purchase order.

When I analyze a company’s sales forms, I raise its own purchase orders too, because they decide what it commits to when it buys and its recourse when a delivery arrives late, short, or out of specification. Where a signed master agreement also exists, purchase order terms that override a master agreement raise a separate conflict.

What should you check in your company’s current forms?

A forms audit tests each document your company sends or receives against seven questions drawn from Minnesota’s battle-of-the-forms rules. In my practice, it starts with gathering the quote, the order acknowledgment, the invoice, the credit application, and one or two recent customer purchase orders, so the conflicting-terms question can be answered in the real documents rather than in the abstract:

1. Which document is the offer in a typical order?
2. Does the offer limit acceptance to its own terms, on its face?
3. Does each form object in advance to the other side’s additional or different terms?
4. Are the key terms on the face or clearly incorporated by reference, in readable type, with any merchantability disclaimer naming merchantability (or an “as is” clause that meets Minn. Stat. § 336.2-316(3)(a))?
5. Who may sign or click “accept” for the company, does the other side know of any limit on that authority, and do receiving staff sign only for receipt?
6. Is any customer or supplier based outside the United States, where the CISG may apply?
7. Has every conflict over a term that matters been settled in a signed agreement?

Minnesota’s battle-of-the-forms rule, one part of Minnesota business contract law, favors the business whose terms are in the offer, on the face of the document, and in front of someone with authority to accept them. Added terms that would result in surprise or hardship stay out unless the party receiving them agrees, the rule for directly conflicting terms is unsettled, and an expressly conditional response, followed by performance on both sides without agreement to the new terms, can leave both sides with the code’s default terms wherever their forms disagree. If you would like a second set of eyes on how your own forms would fare in a dispute, email Aaron Hall at [email protected] with a brief description. I run an intake and conflict check before any forms or other documents change hands.