United States Court of Appeals for the First Circuit · Contracts
ContractsUCC § 2-207battle of the formsbattle of the formsUCC 2-207conflicting termsacknowledgment formpurchase order
Facts
Ionics bought thermostats from Elmwood on three occasions for use in water dispensers. Ionics' purchase orders stated that acceptance was only on Ionics' exact terms and preserved all remedies available under law, while Elmwood's acknowledgment forms stated that sale was only on Elmwood's terms, objected to different terms, and limited warranties and remedies. Ionics received each acknowledgment before shipment and then accepted delivery of the goods without objection. The parties agree a valid contract existed and dispute only the extent of Elmwood's liability.
Issue
When a buyer's purchase order and a seller's acknowledgment contain directly conflicting terms, and the parties' later conduct shows that a contract exists, does UCC § 2-207 make the seller's acknowledgment govern because the buyer accepted the goods, or does § 2-207(3) govern so that conflicting terms drop out and the contract consists only of agreed terms plus supplementary UCC terms?
Rule
Where two commercial forms contain contradictory terms, each party is assumed to object to the other's conflicting clause. Mere acceptance of goods is insufficient to infer consent to the seller's conflicting terms under § 2-207(1), and the conflicting terms do not become part of the contract under § 2-207(2) because objection is supplied by the conflicting forms; if the parties' conduct recognizes a contract, § 2-207(3) governs and the contract consists of the terms on which the writings agree plus supplementary UCC terms.
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Pine Harbor Beverage Systems in Milwaukee sent a purchase order to North Valley Controls in Toledo for 2,000 pressure switches. Pine Harbor's form stated that acceptance was limited to its exact terms and that all remedies available under law were preserved; North Valley's acknowledgment said it would sell only on its own terms, objected to different terms, and limited remedies to repair or refund. Pine Harbor received the acknowledgment before shipment and then accepted and paid for the switches.
If a defect later causes losses and the parties dispute whether North Valley's limitation of remedies became part of the contract, which is the best answer?
Explanation. The majority held that when commercial forms contain directly contradictory terms and the parties proceed with performance, mere acceptance of goods does not show assent to the seller's conflicting boilerplate. Each side is assumed to object to the other's conflicting clause, so the conflicting terms do not enter the contract under § 2-207(2). Because conduct recognizes a contract, § 2-207(3) governs, and the contract consists of agreed terms plus supplementary UCC terms. (Derived from Ionics, Inc. v. Elmwood Sensors, Inc. (n.d.).)