Diamond Fruit Growers, Inc. v. Krack Corp.
794 F.2d 1440
C.A.9 (Or.), 1986.
Facts: Krack Corp. manufactures cooling units that have metal tubing. Metal-Matic is one of Krack’s suppliers of tubing. During the last ten years the parties have had the same course of dealing. At the beginning of the year Krack would send a blanket purchase order to Metal-Matic. They followed this by sending release purchase orders as tubing was needed. Metal-Matic responded by sending an acknowledgement form and shipping the tubing. Metal-Matic’s acknowledgment form disclaimed all consequential damages and limited liability to refund, repair or replacement. Metal-Matic expressly made its assent conditional upon Krack’s assent of the disclaimer. Krack’s purchase order did not have this provision and they never formally assented. During the ten years one of Krack’s managers objected to the terms of the disclaimer, but both parties continued to do business. In February 1981, Krack sold a unit to Diamond Fruit Growers that leaked.
Rule of Law: Under the UCC §2-207 when the purchase order and acknowledgment form state different terms the additional terms are construed as a proposal and become part of the contract unless: The offer expressly limits acceptance conditional on assent to the terms of the offer.
Issue: Are the additional terms of Metal-Matic’s disclaimer of liability part of the contract when its agreement is expressly conditioned on its assent to the additional terms?
Decision and Opinion: One application goal of the UCC§2-207 is aimed at commercial transactions where parties exchange printed purchase order and acknowledgement forms. Since the drafters of the UCC understood that forms were drafted leaning toward the thinking of the drafters and often the forms do not correspond. UCC §2-207 provides rules of contract formation in these instances where forms do not agree to all the terms. UCC §2-207 modifies the common law’s mirror image rule. At common law an acceptance that varies the terms is a counteroffer. If the offeror goes ahead after receiving the counteroffer, his performance is an acceptance of the terms of the counteroffer. An underlying principle of UCC §2-207 is neutrality. It aims to not give one party over another an advantage by simply sending the first or in some cases the last form. It accomplishes this by doing away with the common law’s last shot rule. It gives neither party the terms it attempted to impose unilaterally. This requires a specific and unequivocal expression of assent on the part of the offeror when the offeree conditions its acceptance on assent to additional or different terms. Since Krack did not unequivocally express its assent then UCC §2-207(3) would apply to fill in the terms of the contract. Metal-Matic’s disclaimer of liability did not become part of the contract. Court affirms lower court ruling.
Effect on Business and Society: This case demonstrates the importance of knowing exactly what terms become parts of a contract. If respective business forms do not agree and are conditioned on express assent then the offeree must unequivocally express assent and going ahead and doing business does not constitute unequivocal express consent.
Use of Precedent: Neither party pointed to any precedent and through the courts research none were found. One case had been decided on this issue: Mckenzie v. Alla-Ohio Coals, Inc. but it was of no value because there was no analysis to support the decision. There was another case after this one that had similar facts, Advance Concrete Forms, Inc. v. McCann Const. Specialties Co.916 F.2d 412C.A.7 (Wis.), 1990 in this case the court ruled in the opposite direction.
Summary Conclusion: When parties have different terms that are expressly made conditional on assent to the additional terms then assent must be unequivocally expressed. Krack did not expressly assent to Metal-Matic’s additional terms so they are not part of the contract and the appellate court upheld lower courts findings as such.