DTE Energy Technologies, Inc. v. Briggs Electric, Inc.

Brief Fact Summary.

DTE Energy Technologies, Inc. (Plaintiff) sold generators to Briggs Electric, Inc. (Defendant). After Defendant placed the order and Plaintiff acknowledged it, Plaintiff sent Defendant its Standard Terms and Conditions for Sale that included a forum-selection clause. Disputes over the contract arose and Plaintiff sought to hold Defendant to the forum-selection clause.

Synopsis of Rule of Law.

The Uniform Commercial Code (U.C.C.) does not provide for the enforcement of a forum-selection clause when the clause is contained in fine print, is considered an additional term, and materially alters the parties’ contract.

Facts.

Plaintiff is a Michigan corporation that sells electric generators. Defendant was an electrical subcontractor on a project in California who sent a Purchase Order to Plaintiff for the purchase of generators. 20 days later, Plaintiff emailed Defendant confirming the order. Almost a month later, Plaintiff sent Defendant an Order Acknowledgment that had, as an attachment, Plaintiff’s Standard Terms and Conditions for Sale. These terms contained a clause requiring that any disputes under the contract be adjudicated in a Michigan court, applying Michigan law. Eventually the two parties had disputes regarding an alleged delay in Plaintiff’s delivery and an alleged breach of contract and nonpayment by Defendant. Defendant sought mediation in California to resolve the disputes and Plaintiff sued in federal district court in Michigan for breach of contract and for a declaration that Plaintiff was not required to mediate the dispute in California based upon the forum-selection clause. Defendant claimed that the contract was formed when it sent the offer in the form of the Purchase Order which Plaintiff accepted through its conduct and that since Defendant had never agreed to the forum-selection clause, the federal court in Michigan had no jurisdiction. Plaintiff countered that the Order Acknowledgment and attached Standard Terms made up the offer, and that Defendant’s act of sending payment without objection to the terms constituted its acceptance of the offer, including the forum-selection provision.

Issue.

Does the U.C.C. provide for the enforcement of a forum-selection clause in a contract between merchants when the clause is found in the fine print, is considered an additional term, and materially alters the parties’ contract?

Held.

(Duggan, J.) No. The Uniform Commercial Code (U.C.C.) does not provide for the enforcement of a forum-selection clause when the clause is contained in fine print, is considered an additional term, and materially alters the parties’ contract. The Purchase Order contained the price, quantity, and delivery terms and was, therefore, sufficiently definite to be considered an offer. The fact that Defendant was not yet hired on as the subcontractor when the Purchase Order was sent is immaterial to this determination. The Order Acknowledgment referenced the Purchase Order and contained the Purchase Order’s terms. Since the Purchase Order was a valid offer, the question is whether the forum-selection clause became part of the contract. U.C.C. § 2-207 states that a written confirmation is considered an acceptance of an offer, even when the terms are not identical to the offer. An exception to this rule comes when the accepting party states that “acceptance is expressly made conditional on assent to the additional or different terms.” An acceptance must be expressly conditional on the offeror’s assent to different or additional terms. Plaintiff argues that the attached Standard Terms stated that they constituted the parties’ entire understanding and agreement, so even if the Purchase Order was an offer, the Order Acknowledgment and Standard Terms was not an acceptance but a rejection of that offer and provision of a new offer. This argument fails because the “entire agreement” language does not contemplate Defendant’s assent to different or additional terms, but instead attempts to make the additional or different terms part of the contract without Defendant’s assent. The additional terms are interpreted as proposed additions to the contract. When the parties are both merchants, as is the case here, normally such additional terms are considered part of the contract. However, there are exceptions, such as when the additional term “materially alters” the contract. Defendant argues that this exception applies because the forum-selection clause materially alters the contract. Applying Michigan law, a unilateral addition of a forum-selection clause to a contract controlled by the U.C.C. is a material alteration of that contract. Defendant is not bound by the clause since it was contained in the fine print of the additional terms and materially altered the contract. Motion to dismiss granted.

Discussion.

U.C.C. § 2-207 changed the rule in common law that the terms of an acceptance must be identical to those in the offer in order for a contract to be binding. Under the common law, changes made by the offeree were considered a rejection of the initial offer and the provision of a counteroffer. §2-207 changed this rule in order to ease commerce between merchants who commonly employ standard forms when doing business.