Brown Machine, Inc. v. Hercules, Inc

Brief Fact Summary. Plaintiff, Brown Machine, Inc. sold a trim press to Defendant, Hercules, Inc. An indemnity provision was included in Plaintiff’s acknowledgement of order form, but not in Defendant’s purchase order. Plaintiff is bringing the present cause of action to enforce the indemnity provision.

Synopsis of Rule of Law. Under the UCC, additional terms become part of a contract between merchants unless the offer expressly limits acceptance to the terms included in the offer, the additional terms materially alter the contract, or notification of objection to the additional terms has been given or is given within a reasonable time.

Facts. Plaintiff sold Defendant a trim press. At the beginning of negotiations for the purchase of the trim press, Defendant requested a quote for the trim press from Plaintiff. Plaintiff submitted a proposal to Defendant, which included an indemnity provision. Defendant called Plaintiff and indicated that a purchase order had been prepared, but that Defendant objected to the deposit. Plaintiff indicated that the deposit could not be waived.
The purchase order was for a trim press with the specifications of the quote with the exception that “Standard regular forward trim” should be changes to “Reverse trim.” The purchase order expressly limited acceptance to the terms included in the purchase order and expressly rejected any terms not included. The purchase order provided that acceptance of the terms of the purchase order could be made by accepting the order, delivering the press, or providing services call for in the purchase order. The purchase order did not contain an indemnity provision. Two copies of the purchase order were sent to Plaintiff, one to keep and one to return. Plaintiff never returned the acknowledgement copy.
Plaintiff then sent an invoice to Defendant requesting the deposit and an order acknowledgement that included the same provisions as the proposal, including the indemnity provision. The order acknowledgement also included a provision requiring notification within 7 days if the terms and conditions were not consistent with Defendant’s understanding. Defendant responded to the order acknowledgement by again requesting that “Standard regular forward trim” be replaced with “Reverse trim”, but stating that all other specifications were correct. Defendant never paid the deposit, but Plaintiff shipped the trim press and Defendant paid the full purchase price.
An employee of Defendant was injured while operating the press and sued Plaintiff. Plaintiff demanded that Defendant defend the suit and Defendant refused. Plaintiff settled the suit and initiated this action for indemnification.

Issue. Was the indemnification provision included in the purchase contract?
Was Plaintiff’s acknowledgement a counter offer or an acceptance with different or additional terms?
Are the different terms included in Plaintiff’s acknowledgement part of the contract?

Held. No. The indemnification provision did not become part of the contract between the parties.
Generally a price quote is not an offer, but an invitation to enter into negotiations. In this case, the Court found that Defendant could not reasonably have determined that Plaintiff’s quote was an offer. Plaintiff’s proposal expressly indicated that it was not binding until Plaintiff acknowledged the acceptance. In addition, were it an offer, the terms indicated that it expired in 30 day and Defendant did not accept prior to the expiration of 30 days.
The Court determines that it is the purchase order, and not the price quote, that constitutes the offer.
Next, the Court addresses whether Plaintiff’s acknowledgement was an acceptance or a counter offer. To be a counter offer, the acknowledgement must be expressly conditional and clearly notify the offeror that the offeree will not proceed with the transaction unless the conditions of the counter offer are met. The Court does not find any evidence of Plaintiff’s unwillingness to proceed with the transaction, and determines that the acknowledgement constitutes an acceptance with additional or different terms. Under the UCC, additional terms become part of a contract between merchants unless (1) the offer expressly limits acceptance to the offer’s terms, (2) the additional terms materially alter the contract, or (3) notification of objection to the additional terms has been given or is given in a reasonable time.
Defendant’s purchase order (the offer) expressly limits acceptance to the terms included in the purchase order. In addition, the inclusion of the indemnity provision without Defendant’s express consent would materially alter the agreement between the parties. The Court also notes that Defendant’s response to Plaintiff’s acknowledgement of order that all other specifications were correct was not an assent to the additional terms. Therefore, the indemnity provision did not become part of the contract between the parties.

Discussion. In the present case, the indemnification clause was an additional term not included in the contract because the offer expressly limited acceptance to the terms of the offer and inclusion of the indemnity provision without express consent of Defendant would materially alter the contract.