Contract Formation by Conduct in the Battle of the Forms

BorgWarner PDS Irapuato S. de R.L. de C.V. v. Parker Hannifin Corp.

Introduction

This case arises from a supply-contract dispute between BorgWarner PDS Irapuato (“BorgWarner”), a Mexican automotive‐parts purchaser, and Parker Hannifin Corporation (“Parker”), an Ohio‐based seller of bonded pistons. Beginning in early 2021, the parties exchanged a quotation, a letter of intent, multiple purchase orders/releases, e-mail confirmations, and acknowledgments—but never signed a single definitive long‐form contract. When material costs spiked midyear, Parker announced a price increase and BorgWarner refused to pay, pointing to its own purchase‐order terms that forbade unilateral price hikes. Parker insisted its quotation terms controlled and sued (via diversity jurisdiction) for the unpaid balance; BorgWarner counterclaimed for breach and declaratory relief that its own terms governed. The district court awarded summary judgment to Parker, holding that Parker’s quotation and attached “Offer of Sale” terms governed the relationship and authorized the price increase. BorgWarner appealed, and the Sixth Circuit reversed and remanded.

Summary of the Judgment

The Sixth Circuit held that neither Parker’s initial quotation nor BorgWarner’s purchase‐order terms formed the exclusive governing contract. Although Parker’s quotation was detailed, it was explicitly “tentative” and “subject to change pending entire review of [the] purchase order,” and the parties continued negotiating quantity, delivery and pricing far beyond mere acceptance. BorgWarner’s counter-terms likewise conflicted with Parker’s offer. Under Ohio Revised Code § 1302.10(C) and UCC Article 2, a binding sales contract can arise from the parties’ conduct even if their writings alone do not match. Because the parties shipped and accepted goods for months without agreeing in writing on which boilerplate terms controlled, the court concluded a contract by conduct existed but its precise terms had yet to be determined. The panel therefore reversed the district court’s grant of summary judgment to Parker and remanded for the district court to ascertain which terms (from the competing drafts or from UCC default rules) apply to the conduct-based contract.

Analysis

1. Precedents Cited

  • Dyno Construction Co. v. McWane, Inc. (6th Cir. 1999) – held that a price quotation can be an offer if it “reasonably appears” that acceptance alone would create a contract.
  • International Periodical Distributors v. Bizmart (Ohio 2002) – confirmed that Ohio follows UCC Article 2 for goods‐sale transactions.
  • Alligood v. Procter & Gamble Co. (Ohio Ct. App. 1991) – set out essential contract terms (parties, subject, consideration, quantity, price).
  • Extreme Machine & Fabricating, Inc. v. Avery Dennison Corp. (Ohio Ct. App. 2016) – recognized that parties may form a UCC sales contract through their conduct, incorporating agreed‐upon writing terms plus supplemental UCC terms.
  • Ohio Rev. Code § 1302.10 – the “battle of the forms” rule allowing formation by performance when writings conflict.

2. Legal Reasoning

The court’s reasoning proceeds in three steps:

  1. No Offer and Acceptance on Initial Forms. Parker’s February quotation, though detailed, said it was “tentative and subject to change pending entire review of purchase order.” It provided only “estimated annual use” and minimum‐order quantities. Under UCC § 2-204 and Ohio law, that language and the surrounding e-mail chain showed Parker invited further negotiation rather than inviting BorgWarner to unqualified acceptance. BorgWarner’s subsequent purchase orders expressly rejected any terms not in BorgWarner’s own boilerplate, so they could not constitute unqualified acceptance of Parker’s offer. Nor did the mutual drafts disclose a meeting of the minds on essential terms like quantity (requirements contract versus fixed‐quantity estimate).
  2. Battle of the Forms and Contract by Conduct. Because neither side’s drafts alone produced a contract, the parties nonetheless performed—shipping and paying for goods for months. Under Ohio Rev. Code § 1302.10(C) (UCC 2-207(3)), performance by both sides can establish a contract, and its terms comprise (a) the writings on which they agree and (b) any supplemental UCC default terms. As the panel put it: “Although Parker’s quote and BorgWarner’s purchase orders did not create an enforceable contract, their conduct did.”
  3. Remand to Determine Governing Terms. The Sixth Circuit reversed summary judgment because it remains unclear which written provisions (from Parker’s Offer of Sale, BorgWarner’s Purchase Order Terms, or UCC defaults) apply to that conduct‐based contract. Critical questions include: Were Parker’s 60-day notice requirements enforceable? Did Parker give reasonable notice under UCC § 2-309? Did BorgWarner’s shipping/paying for Parts after the October price adjustment amount to assent to that adjustment? The district court must sort these out under applicable UCC sections and Ohio law.

3. Impact

This decision clarifies that in lengthy post-offer negotiations, “battle of the forms” disputes cannot be shoe-horned into a single pre-printed form if performance continues despite conflicting drafts. Industry participants must understand:

  • Detailed quotations may constitute offers, but only if their language and context leave no door open for further negotiation.
  • Counter‐written terms that expressly reject the other side’s boilerplate can prevent acceptance—even of the same overall transaction.
  • UCC § 2-207/Ohio Rev. Code § 1302.10(C) will supply a contract by conduct when the parties perform without ever resolving whose printed terms prevail.
  • On remand, courts will delve into which supplemental UCC terms fill the gaps—on pricing adjustments, notice periods, termination, indemnification and more.

Complex Concepts Simplified

  • Battle of the Forms: When buyer and seller exchange conflicting standard forms (quotations, invoices, purchase orders), UCC § 2-207 provides rules to decide whether a contract formed and whose terms apply.
  • Contract by Conduct: Under UCC § 2-204 and § 2-207(3), parties can form a binding contract simply by doing business—shipping and accepting goods—even if their written forms never align.
  • Requirements Contract: An agreement where the buyer promises to buy “100% of its requirements” for certain goods exclusively from the seller. This contrasts with a fixed‐quantity estimate bound to a specific minimum.
  • Meeting of the Minds: A contract element requiring that both sides assent to the same essential terms (price, quantity, subject matter). Conflicts here can defeat contract formation by writing alone.

Conclusion

The Sixth Circuit’s decision in BorgWarner v. Parker Hannifin underscores that in long‐running supply relationships, clear drafting and timely resolution of term conflicts are critical. If detailed quotations are to function as binding offers, they must leave no ambiguity on acceptance conditions. If parties reject each other’s boilerplate, they cannot expect performance alone to resurrect their favored terms. And when neither side’s forms align, continued performance creates a “contract by conduct,” incorporating only the agreed‐on portions of their writings plus UCC default rules. On remand, the district court will untangle those layers to decide which terms govern and whether Parker validly imposed the contested price increases. This ruling will guide practitioners—especially in manufacturing and automotive supply chains—on how to structure quotations, purchase orders, and negotiations to avoid uncertain contract foundations.