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The Fine Print

Legal wrangling for interest and attorneys’ fees on invoices

The Uniform Commercial Code (UCC) has, with a few exceptions, been adopted by all of the states. First published in 1952, the UCC is one of a number of acts created to harmonize laws among U.S. states. The UCC relates to the law of sales and other commercial transactions. Section 2-207 provides that—between merchants—additional terms in the acceptance or confirmation (such as in an invoice) of sales are considered proposals to the contract unless the buyer objects to these additional terms within a reasonable time.

Numerous suppliers include “additional terms” on their invoices, such as interest charges and attorney fee language. Specifically, UCC § 2-207 (often referred to as the “battle of the forms”—purchase order versus invoice) states:

(1) 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.

(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer; (b) they materially alter it; or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.

Consequently, if a buyer receives an invoice which contains terms to which it does not agree, it must, within a reasonable time, object to the additional terms. Otherwise, they become part of the contract between the parties.

Many produce supplier invoices contain language that interest will be charged on late payments, even though the parties may never have discussed interest. For example, an invoice could and should state: “A FINANCE CHARGE calculated at the rate of 1½% PER MONTH (18% ANNUALLY), or at the highest rate permitted by law, will be applied to all PAST DUE ACCOUNTS.”

Frequently, invoices also include verbiage concerning attorney fees, such as: “Should any action be commenced between the parties to this contract concerning the sums due hereunder or the rights and duties of any party hereto or the interpretation of this contract, the prevailing party in such action shall be entitled to, in addition to such other relief as may be granted, an award as and for the actual attorneys’ fees and costs in bringing such action and/or enforcing any judgment granted therein.”