Gardner Zemke Co. v. Dunham Bush, Inc.

Supreme Court of New Mexico · Contracts

ContractsUCCBattle of the FormsSale of GoodsWarrantiesUCC 2-207acceptancecounteroffer

Facts

Gardner Zemke, acting as general contractor on a DOE project, sent Dunham Bush a purchase order for chillers that included a one-year manufacturer's warranty provision and required compliance with attached specifications. Dunham Bush responded with a preprinted acknowledgment containing warranty disclaimers, language stating its terms controlled, and a provision deeming the buyer's silence acceptance of those terms. The parties did not resolve the conflicting forms but went forward with delivery and payment. After problems developed with two chillers, Dunham Bush conditioned service on a separate purchase order for non-warranty work, Gardner Zemke rejected that position, and DOE ultimately paid for repairs and withheld money from Gardner Zemke.

Issue

Whether Dunham Bush's acknowledgment, which contained terms different from Gardner Zemke's purchase order and stated that its acceptance was subject to its own terms, was a counteroffer under UCC § 2-207(1) or instead an acceptance. If it was an acceptance, the further question was how to treat the parties' conflicting warranty terms.

Rule

Under UCC § 2-207(1), a responsive form is an acceptance despite additional or different terms unless the offeree clearly and unequivocally communicates that it is unwilling to proceed unless the offeror assents to those terms. Whether an acceptance is expressly conditional on assent depends on the commercial context and the objective manifestations of the parties' understanding, including their conduct and, when available, course of performance, course of dealing, and usage of trade. If a contract is formed under § 2-207(1) and the parties' forms contain conflicting different terms, those conflicting terms cancel out and the UCC supplies the governing terms.

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

Mesa Valley Mechanical in Albuquerque sent a purchase order to Rio Norte Cooling Systems for rooftop units, specifying price, quantity, and a one-year repair warranty. Rio Norte mailed back an acknowledgment stating in bold that its acceptance was "subject to seller's terms" and disclaiming implied warranties, and then shipped the units without any further discussion; Mesa Valley accepted delivery and paid.

Under the majority rule, is Rio Norte's acknowledgment automatically a counteroffer rather than an acceptance?

Explanation. The majority rejected the view that boilerplate alone converts a responsive form into a counteroffer. A response is expressly conditional only if the offeree clearly and unequivocally communicates that it is unwilling to proceed unless the offeror assents to the new terms. Mere language making the bargain subject to the offeree's terms, coupled with conflicting warranty boilerplate, is not automatically enough. (Derived from Gardner Zemke Co. v. Dunham Bush, Inc. (n.d.).)