Gottlieb v. Alps South Corp.

District Court of Appeal of Florida, Second District · 2007 · Contracts

ContractsU.C.C.Battle of the FormsLimitation of LiabilityDamagessection 672.207battle of the formsmaterial alteration

Facts

Gottlieb supplied Alps with a specialty fabric that Alps incorporated into prosthetic liners after testing and approving the original fabric. Gottlieb later substituted a similar but not identical yarn without notifying Alps, and the trial court found that substitution caused a defect not easily discoverable by Alps. After customer complaints, Alps recalled liners from the market and destroyed recalled and inventory devices made with the defective fabric. The parties' finished goods contracts repeatedly included a clause stating that the buyer would not be entitled to indirect or consequential damages, including loss of profit, promotional or manufacturing expenses, injury to reputation, or loss of customer.

Issue

Whether the trial court erred in refusing to enforce the limitation of liability clause on the ground that it materially altered the contract under section 672.207, and whether Alps could recover consequential damages and lost profits despite that clause. The case also presented whether the limitation issue was preserved when not pleaded in the final answer but litigated at trial.

Rule

Under section 672.207, between merchants, additional terms in an acceptance become part of the contract unless the offer limits acceptance to its terms, the terms materially alter the contract, or timely objection is made. A party seeking exclusion of an additional term as a material alteration bears the burden of proof, and this court follows the rationale that material alteration turns on surprise rather than hardship as an independent criterion; what a reasonable merchant could be presumed to have accepted is not a material alteration. A limitation clause barring consequential damages does not bar recovery of direct and incidental damages otherwise available under the U.C.C., and lost profits are recoverable only if proven with reasonable certainty rather than speculation.

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Crescent BioWrap, a medical-supply manufacturer in Tampa, ordered specialty film from Harbor Textile Solutions, a fabric merchant in New York. Harbor's acknowledgment form, sent after each order, included a visible term stating that the buyer could not recover indirect or consequential damages; after the film proved defective, Crescent argued the term never became part of the contract because it materially altered the deal.

Under the majority rule applied here, who has the burden of proving whether the consequential-damages exclusion should be kept out of the contract as a material alteration?

Explanation. Between merchants, an additional term in an acceptance becomes part of the contract unless one of the section 2-207(2) exceptions applies. The party seeking exclusion of the additional term as a material alteration bears the burden of proof. Thus Crescent, which wants the consequential-damages exclusion removed, must prove material alteration. (Derived from Gottlieb v. Alps South Corp. (n.d.).)