March 26 letter, Reilly Foam first contends that Rubbermaid accepted
all terms on the price list in their entirety without modification.
Therefore, Mr. Ferrante's "hidden intent" to impose additional or
different terms should not be enforced. (Ans. of Reilly Foam Mem. in
Opp. to Rubbermaid's Mot. for Summ. Judg. at 20). As a general matter,
Reilly Foam is correct; undisclosed intentions cannot be considered terms
of a contract. See Ingrassia Constr. Co. v. Walsh, 486 A.2d 478, 483
(Pa.Super.Ct. 1984); Pioneer Commercial Funding Corp. v. Am. Fin. Mortg.
Corp., 50 Pa. D. & C. 4th 31, 70 (Ct. Com. Pl. 2000).
Mr. Ferrante did not "hide" his intentions, however; he stated a number
of new terms quite clearly in his letter of March 30. In particular, he
attempted to do three things: restrict Rubbermaid's commitment to two
million sponges, permitting Reilly Foam to recoup its tooling cost of
$30,000; ensure that New Knight would purchase its sponges from Reilly
Foam; and provide that Rubbermaid would share in any cost savings from
Although Reilly Foam seeks to dismiss the letter as mere
"correspondence" without any effect on the contract terms, the Court is
bound to read both documents of March 30 — Ferrante's letter and
the approved list — together. Reilly Foam's March 26 correspondence
specifically invited Rubbermaid to respond by letter. It would be
incongruous for Reilly Foam to now ignore that letter after Rubbermaid
complied with its instructions. As part of the contract, the documents
should be read as a whole, with the aim of construing conflicting clauses
together, if possible. See Brown v. Cooke, 707 A.2d 231, 233
(Pa.Super.Ct. 1998); Bickings v. Bethlehem Lukens Plate, 82 F. Supp.2d 402,
405 (E.D.Pa. 2000) (Brody, J.).
Reilly Foam notes that, in part, Mr. Ferrante has accepted and
concluded purchase contracts with a mere notation of approval on a price
quote. Thus, he should be deemed to have approved and accepted Reilly
Foam's offer. The Court need not speculate as to Mr. Ferrante's
intentions based solely on the single word "approved" on a price list in
other cases or the instant one. Mr. Ferrante's letter expresses an intent
to impose new terms on the contract.
b. Terms of the Contract
If Reilly Foam's March 26 letter operates as an offer and Rubbermaid's
March 30 correspondence acts as an acceptance, the Court is left with the
task of determining the terms of the agreement between these merchants
under Pa.U.C.C. § 2207, commonly called the "Battle of the Forms"
i. Section 2207
Frequently, businessmen do not set forth all of the terms of their
agreements in a single, comprehensive document. Rather, deals are made on
the basis of conversations and letters exchanged between the parties.
Ultimately, one party reduces the terms of a proposed deal to writing,
which is deemed an offer. Under the common law, a document qualifying as
an offer could only be `accepted' by a second document expressing
acceptance on terms identical to the offer. See Slaymaker v. Irwin, 4
Whart. 369, 380-81 (Pa. 1839); Joseph v. Richardson, 2 Pa. Super. 208,
212-14 (Pa.Super.Ct. 1896).
The rule changed with the enactment of the Battle of the Forms
provision of the Pa.U.C.C., which permits an expression of acceptance to
operate as an acceptance even if it contains additional or different
terms. See Pa.U.C.C. § 2207(a). The additional
terms become part of
the contract unless: (1) the offer expressly limits acceptance to the
terms of the offer; (2) the inserted term materially alters the offer; or
(3) notification of objection to the inserted terms has been given or is
given within a reasonable time. Pa.U.C.C. § 2207(b)(1)-(3).*fn4
The fate of different terms is less clear. Section 2207(b) does not
directly address different terms in an acceptance, and the question
remains: if the offer is accepted on different terms, should the terms of
the offer control or should the acceptance be followed, or should the
conflicting terms cancel each other out, to be replaced by gap fillers
provided by the U.C.C.? The question has divided courts and scholars.
One approach considers any expression of acceptance with differing
terms as actually a rejection and counter-offer. Thus, the terms outlined
in the acceptance would govern. See Roto-Lith, Ltd. v. F.P. Bartlett &
Co., 297 F.2d 497 (1st Cir. 1962), overruled by Ionics, Inc. v. Elmwood
Sensors, Inc., 110 F.3d 184, 187 (1st Cir. 1997). This view has been
widely discredited as a revival of the common law rule, and the Court is
not aware of any jurisdiction in which it is currently in force.
The minority view permits the terms of the offer to control. Because
there is no rational distinction between additional terms and different
terms, both are handled under § 2207(b). For support, advocates of
this position point to Official Comment 3: "Whether or not additional or
different terms will become part of the agreement depends upon the
provisions of subsection [b]." See Steiner v. Mobile Oil Corp.,
569 P.2d 751, 759-60 n. 5 (Cal. 1977); Boese-Hilburn Co. v. Dean Mach.
Co., 616 S.W.2d 520, 527 (Mo.Ct.App. 1981); see also Mead Corp. v.
McNally-Pittsburgh Mfg. Corp., 654 F.2d 1197, 1204 & n. 11 (6th Cir.
1981) (implicitly assuming, without holding, that different terms in
acceptance would be subject to analysis under Ohio's version of §
2207(b)).*fn5 Professor Summers, the leading advocate of the minority
rule, reasons that offerors have more reason to expect that the terms of
their offer will be enforced than the recipient of an offer can hope that
its inserted terms will be effective. See James J. White & Robert S.
Summers, Uniform Commercial Code § 1-3 at 35 (5th ed. 2000). The
offeree at least had the opportunity to review the offer and object to
its contents; if the recipient of an offer objected to a term, it should
not have proceeded with the contract. See id. Following this approach,
Reilly Foam urges that the terms of its March 26, 1999 letter and price
list, as the offer, would control. Because each of Rubbermaid's new terms
posed material alterations to the parties contract, they would have no
The final approach, held by a majority of courts, is now known as the
"knockout rule." Under this approach, terms of the contract include those
upon which the parties agreed and gap fillers provided by the U.C.C.
provisions. This approach recognizes
the fundamental tenet behind U.C.C.
§ 2207: to repudiate the "mirror-image" rule of the common law. One
should not be able to dictate the terms of the contract merely because
one sent the offer. Indeed, the knockout rule recognizes that merchants
are frequently willing to proceed with a transaction even though all
terms have not been assented to. It would be inequitable to lend greater
force to one party's preferred terms than the other's. As one court
recently explained, "An approach other than the knock-out rule for
conflicting terms would result in . . .  any offeror . . .  always
prevailing on its terms solely because it sent the first form. That is not
a desirable result, particularly when the parties have not negotiated for
the challenged clause." Richardson v. Union Carbide Indus. Gases Inc.,
790 A.2d 962, 968 (N.J. Super. Ct. App. Div. 2002). Support for this view
is also found in the Official U.C.C. Comments:
Where clauses on confirming forms sent by both parties conflict each
party must be assumed to object to a clause of the other conflicting with
one on the confirmation sent by himself. As a result the requirement that
there be notice of objection which is found in subsection [b] is
satisfied and the conflicting terms do not become a part of the
contract. The contract then consists of the terms originally expressly
agreed to, terms on which the confirmations agree, and terms supplied by
this Act, including subsection [b].
U.C.C. § 2207 cmt. 6. Advocates of the knockout rule interpret
Comment 6 to require the cancellation of terms in both parties' documents
that conflict with one another, whether the terms are in confirmation
notices or in the offer and acceptance themselves. A majority of courts
now favor this approach. See JOM, Inc. v. Adell Plastics, Inc.,
193 F.3d 47, 54 (1st Cir. 1999) (ascribing knockout rule to law of Maine
and Maryland); Ionics v. Elmwood Sensors, Inc., 110 F.3d 184, 189 (1st
Cir. 1997) (applying Massachusetts law); Northrop Corp. v. Litronic
Indus., 29 F.3d 1173, 1178 (7th Cir. 1994) (describing this approach as
"majority rule" and predicting Illinois would adopt it); Daitom, Inc. v.
Pennwalt Corp., 741 F.2d 1569, 1578-79 (10th Cir. 1984) (applying
Pennsylvania law); Westinghouse Elec. Corp. v. Nielsons, Inc.,
647 F. Supp. 896 (D.Colo. 1986) (applying Colorado law); Owens-Corning
Fiberglass Corp. v. Sonic Dev. Corp., 546 F. Supp. 533 (D.Kan. 1982)
(applying Kansas law); Armco Steel Corp. v. Isaacson Structural Steel
Co., 611 P.2d 507, 518 & n. 30 (Ala. 1980); Southern Idaho Pipe & Steel
Co. v. Cal-Cut Pipe & Supply, Inc., 567 P.2d 1246, 1254-55 (Idaho 1977);
Uniroyal, Inc. v. Chambers Gasket & Mfg. Co., 380 N.E.2d 571, 578
(Ind.Ct.App. 1978); S.C. Gray, Inc. v. Ford Motor Co., 286 N.W.2d 34
(Mich. 1979); St. Paul Structural Steel Co. v. ABI Contracting, Inc.,
364 N.W.2d 83 (N.D. 1985) (applying Minnesota law); Richardson, 790 A.2d
at 968 (applying New Jersey law); Gardner Zemke Co. v. Dunham Bush,
Inc., 850 P.2d 319, 325-26 (N.M. 1993); Lory Fabrics, Inc. v. Dress
Rehearsal, Inc., 434 N.Y.S.2d 359, 363 (N.Y.App. Div. 198 0); Superior
Boiler Works v. R.J. Sanders, Inc., 711 A.2d 628, 635 (R.I. 1998);
Hartwig Farms, Inc. v. Pacific Gamble Robinson Co., 625 P.2d 171 (Wash.
The Court's task today is to predict how the Pennsylvania Supreme Court
would rule if confronted with the issue. See Travelers Indem. Co. v.
DiBartolo, 131 F.3d 343, 348 (3d Cir. 1997). In making this
determination, federal courts should examine, if available: "(1) what the
Pennsylvania Supreme Court has said in related
areas; (2) the decisional
law of the Pennsylvania intermediate courts; (3) federal appeals and
district court cases interpreting state law; and (4) decisions from other
jurisdictions that have discussed the issues we face here." Werwinski v.
Ford Motor Co., 286 F.3d 661, 675 (3d Cir. 2002).
The Pennsylvania Supreme Court has never addressed the issue. The Court
has unearthed only one intermediate court opinion, but it does not
directly address the question, contains self-contradictory comments, and
does little to aid in prediction. See United Coal & Commodities Co. v.
Hawley Fuel Coal, Inc., 525 A.2d 741, 743-44 (Pa.Super.Ct. 1987).*fn6
The court circumnavigated the issue. Therefore, United Coal provides
I next turn to federal courts within Pennsylvania. My colleagues seem
to be comfortable with application of the knockout rule, but to date, no
one has expressly held it to be the law. One court applied the knockout
rule, but did so upon the agreement of the parties. See Titanium Metals
Corp. v. Elkem Mgmt., 191 F.R.D. 468, 470 (W.D.Pa. 1998) (Smith, J.).
Another described the debate in some detail but never specifically
adopted a rule. See Pennsylvania Power & Light Co. v. Joslyn Corp., Civ.
A. No. 87-2027, 1988 U.S. Dist. LEXIS 12073, at *6, 1988 WL 11577, at *3
(E.D.Pa. Oct. 31, 1988) (Cahn, J.). A third court has expressed a
preference for the knockout rule, but it ultimately rested on the ground
that the offeror had expressly objected to the offeree's insertion of a
different delivery term into the contract, barring the term under
Pa.U.C.C. § 2207(b)(3)). See Reaction Molding II, 588 F. Supp. at
The Tenth Circuit has predicted that the Pennsylvania Supreme Court
would opt for the knockout rule. See Daitom, 741 F.2d at 1578-79. In
light of the superior policy reasons behind the knockout rule, its fit
with the text of the statute, and the vast majority of jurisdictions
adopting it, I concur with the Tenth Circuit and conclude that the
Pennsylvania Supreme Court would adopt the knockout rule.
ii. Application of § 2207 to the Exchange of
Letters Between Reilly Foam and Rubbermaid
The parties have concluded a contract for the sale of sponges. Both
Reilly Foam's proposal and Rubbermaid's response call for the sale of
sponges of differing varieties, and they agree on the identification of
particular sponges, along with dimensions and prices for each. Rubbermaid
also agreed to add $0.015 to price of each sponge until Rubbermaid had
made purchases of 2 million sponges to cover Reilly Foam's tooling costs