Corinthian Pharmaceutical Systems, Inc. v. Lederle Laboratories

United States District Court, S.D. Indiana, Indianapolis Division · 1989 · Contracts

ContractsSalesU.C.C. formationAcceptance by shipmentAccommodation shipmentBattle of the formsU.C.C. § 2-206U.C.C. § 2-207

Facts

Lederle manufactured and sold DTP vaccine, and Corinthian was a drug distributor that had previously bought vaccine from Lederle. Lederle's price lists stated that prices were subject to change without notice and that all orders were subject to acceptance by Lederle, and its invoices stated that transactions were governed by Lederle's standard terms and conditions. After learning on May 19, 1986 that Lederle was about to raise the price of DTP, Corinthian used Lederle's Telgo phone system to order 1,000 vials at the lower price and sent written confirmations stating the order was to receive that price. Lederle later shipped only 50 vials at the lower price and sent a letter explaining that this partial shipment was an exception to its normal policy, that the balance would be priced at the higher amount, and that Corinthian could cancel the rest of the order.

Issue

Did Lederle form a contract to sell Corinthian 1,000 vials of DTP vaccine at the lower pre-increase price when Corinthian placed its order before the price increase took effect? If not, did Lederle's shipment of 50 vials constitute acceptance or merely an accommodation and counteroffer under U.C.C. § 2-206?

Rule

A seller's price list or quotation is not an offer when it states that prices are subject to change and that orders are subject to seller acceptance. Under U.C.C. § 2-206, a buyer's order for prompt shipment invites acceptance by a prompt promise to ship or by shipment, but a shipment of nonconforming goods is not an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation; such a shipment is treated as a counteroffer. In addition, where the seller makes acceptance expressly conditional on the buyer's assent to the seller's terms, those terms govern if a contract is formed.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Prairie Meridian Medical Supply, a fictional distributor in Columbus, Ohio, receives a printed catalog from North Harbor Biologics, a fictional manufacturer in Milwaukee, Wisconsin. The catalog lists vaccine prices but states that prices are "subject to change without notice" and that "all orders are subject to acceptance at seller's home office."

If Priya Desai of Prairie Meridian immediately emails an order for 800 doses at the listed catalog price, which statement is most accurate?

Explanation. A seller's price list or quotation is not an offer when it expressly states that prices may change and that orders remain subject to seller acceptance. Under the majority opinion, such language shows the seller has not manifested willingness to be bound by the buyer's assent alone. Therefore, the buyer's order is the first offer.