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One party drafts and signs a document and sends it to another party (assuming no 3rd party site is used). The other party signs the document and returns it EXCEPT that a critical part has been secretly modified. The first party didn't thoroughly check the document and they go on doing business until a dispute happens. One party say the contract is violated. The other shows the modified contract and says there's nothing wrong.

How to determine who's right?

We have to assume that these are not super big corporations with advanced tools and lawyers. Maybe it's individuals signing a loan contract. Maybe it's freelancers having their clients to sign a contract. And the contracts are being sent over using Google Drive or Dropbox or attached to an email.

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I've litigated that issue before in Colorado, in the context of a dozens of pages long contract not governed by the Uniform Commercial Code.

The party who signed the modified contract has an uphill battle because a signature is presumed to be a representation that the contract was read before being signed.

This said, it isn't impossible to overcome this on the theory that the change was fraudulently concealed or actively misrepresented in order to induce the other party to sign it.

For example, if the final draft comes with a cover email that says "this is the same as the version you previously reviewed except for one change on page 3" and the change that is concerning was on page 8, this would probably overcome that presumption.

Courts weight these competing legal theories based upon the evidence.

As noted in other answers, a different analysis applies to a "battle of forms" in contract for the sales of goods governed by the Uniform Commercial Code.

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Last shot wins

This situation has a name: the battle of the forms.

This is how the analysis goes down for your example:

  • Party A made an offer by sending the contract

  • Party B rejected that offer and made a counter-offer by modifying the contract

  • Party A accepted that counter-offer by conduct

So, in this situation, Party B’s modified contract applies.

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  • But did party A consciously agree and sign to the counter-offer? What happened was the original offer was already signed by Party A before sending to B.
    – MysteriousShadow
    Mar 1 at 5:48
  • @OneCuriousPerson it was rejected by party B changing it. Whether A consciously agreed is irrelevant, by acting on B’s offer (even if they never read it), they accepted it.
    – Dale M ♦
    Mar 1 at 10:29
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The other shows the modified contract and says there's nothing wrong. How to determine who's right?

It primarily depends on the jurisdiction and the type of contract.

The scenario you describe is known as the last-shot doctrine. In the US the Uniform Commercial Code "aim[s] to abrogate the criticized common-law mirror image rule and its attendant last-shot doctrine". Superior Boiler Works, Inc. v. R.F. Sanders, Inc, 711 A.2d 628, 636 (1998). The purpose is to preempt "undue advantages derived solely from the fortuitous positions of when a party sent a form", Id., (citation omitted). A number of state legislatures in the US have enacted legislation that largely mimics the model UCC.

The premise that "a critical part has been secretly modified" and went unnoticed to the offeror weakens the validity of altered contract. Trans-Aire Intern. v. Northern Adhesive Co., 882 F.2d 1254, 1260 (1989) points out that material alteration by means of the additional terms "are to be construed as proposals for addition to the contract and will not become part of the contract" (citations and internal quotation marks omitted). Incorporation of material alterations requires the express assent of the offeror/counterofferee, Id. at 1261.

Even if strictly speaking the UCC were inapplicable, the offeree's shadiness in altering a contract already signed by the offeror sounds in breach of the implied covenant of good faith and fair dealing (this covenant is implied in many other jurisdictions besides or beyond the US). That is because the offeror's signature in the contract indicates the offeror is ready to perform the contract as is, and does not expect its terms to be materially modified. In such instances, material alterations that go unnoticed resemble the conditions outlined in Restatement (Second) of Contracts at §153 for a contract to be voidable by the adversely affected party.

The counterofferor ought to ensure the offeror's express acceptance of any material alterations.

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    FWIW, there is no federal UCC. The UCC is a model law promulgated by a non-profit organization called the Uniform Law Commission uniformlaws.org/acts/ucc that has been adopted in substantially similar, but not identical forms, in every U.S. state, territory, commonwealth and district one by one. None of that takes away from the other part of your answer except that the UCC provision is limited to a certain narrow class of contracts usually involving the sale or leasing of goods. Very few states have adopted battle of forms statutes in non-UCC contexts.
    – ohwilleke
    Mar 1 at 21:31
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    The fact that the UCC is not federal law is important, because it means that federal courts don't have federal question jurisdiction over UCC cases.
    – ohwilleke
    Mar 1 at 21:34
  • @ohwilleke Thank you for the clarification. I edited accordingly.
    – Iñaki Viggers
    Mar 2 at 0:27

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