Interstate Industries, Inc. v. Barclay Industries, Inc.

United States Court of Appeals for the Seventh Circuit · 1976 · Contracts

ContractsOffer and acceptancePersonal jurisdictionprice quotationofferinvitation to negotiatemutual assentmeeting of the minds

Facts

Interstate, an Illinois corporation with a facility in Michigan City, Indiana, had engaged in numerous prior transactions with Barclay, a Delaware corporation based in New Jersey that had no property, offices, employees, agents, advertising, bank account, or telephone in Indiana. On August 23, 1973, Barclay sent Interstate a letter from New Jersey stating it could manufacture fiberglass panels meeting certain specifications and listing prices; the letter expressly referred to itself as a "price quotation" and stated prices were based on orders of 75,000 square feet or more, with smaller orders priced at an additional amount, F.O.B. Lodi. In November, Interstate mailed two purchase orders to Barclay's New Jersey office bearing "F.O.B. Delvd." notations. On January 16, 1974, Barclay informed Interstate it would be unable to provide the panels requested, and Interstate later sued for breach of contract.

Issue

Did Barclay's August 23 price quotation constitute an offer such that Interstate's later purchase orders created an enforceable contract to supply goods in Indiana, thereby giving the district court personal jurisdiction under Indiana Trial Rule 4.4? If the letter was only a solicitation or invitation to negotiate, there would be no contract-based basis for jurisdiction.

Rule

A contract for the sale of goods requires mutual assent. Whether a communication naming a price is an offer or merely an invitation to make an offer depends on the manifested intention of the sender under the facts and circumstances; a communication identified as a price quotation and lacking language of commitment or essential terms such as quantity, time of delivery, or payment terms is not an offer. Without such an offer, no enforceable contract arises from a later purchase order, and there is no basis for long-arm jurisdiction premised on a contract to supply goods in the forum state.

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Summit Glassworks, based in Akron, mailed North Shore Builders in Gary a letter stating, "Price quotation: insulated panels available at $18 per square foot." The letter said nothing about quantity, delivery date, or payment terms, and North Shore later mailed back a signed purchase order requesting shipment to Indiana.

If North Shore sues in Indiana claiming the letter was an offer that its purchase order accepted, which is the best argument against contract formation under the governing rule?

Explanation. A communication naming a price is not necessarily an offer. The controlling inquiry is the sender's manifested intention under the facts and circumstances. A writing expressly framed as a price quotation, with no language of present commitment and omitting essential terms such as quantity, delivery time, and payment terms, is merely preliminary negotiation or an invitation to make an offer. The later purchase order therefore would not itself create a contract. (Derived from Interstate Industries, Inc. v. Barclay Industries, Inc. (1976).)