Brief Fact Summary. Plaintiff, Princess Cruises, Inc., entered into a contract with the Defendant General Electric Co. for Defendant to perform inspection and repair services on one of Plaintiff’s ships. Plaintiff’s purchase order and Defendant’s price quotations contain different terms and conditions. Defendant’s terms and conditions limit Defendant’s liability and the type of damages that can be recovered from Defendant.
Synopsis of Rule of Law. A counteroffer acts as a rejection of the original offer. If the counteroffer is accepted, the terms and conditions of the counteroffer apply.
Plaintiff requested that Defendant perform services and provide parts related to the turbines of one of its ships. Defendant manufactured the turbines. Plaintiff created a purchase order, which included a description of the services and a contract price of $260,000. The terms and conditions were on the reverse side of the purchase order and indicated that the purchase order was intended to be an offer. The terms and conditions also indicated that the offer could be accepted by acknowledgement or performance, the terms and conditions could not be unilaterally changed, and Defendant would warranty workmanlike quality and fitness for intended use.
The same day the purchase order was received, Defendant faxed a fixed price quotation containing a more detailed description of the work. The fixed price quotation also included a list of parts and materials, an offered price of $201,888, and Defendant’s terms and conditions. Upon further review of the purchase order, Defendant realized it included additional work not contemplated in the fixed price quotation. Defendant notified Plaintiff of the error. Defendant later sent a final price quotation including an offer to provide services, labor, and materials for $231,925 and Defendant’s terms and conditions. Defendant’s terms and conditions rejected those in Plaintiff’s purchase order, rejected liquidated damages, limited Defendant’s liability to repair or replacement, limited Defendant’s liability for any claims to the greater of $5,000 or the contract price, and also disclaiming liability for consequential damages, lost profits, or lost revenues.
Plaintiff gave Defendant permission to make the repairs based on the final price quotation during a telephone conversation between the parties. Defendant sent Plaintiff a confirmation acknowledging receipt of Plaintiff’s purchase order, restating the price from the final price quotation, and indicating Defendant’s terms and conditions were to govern the contract.
After Plaintiff’s ship was inspected, Defendant recommended that the rotor needed cleaning and balancing. Plaintiff had to cancel a cruise due to the delays caused by the repair. Plaintiff also alleges that continued problems caused further damage to the ship and resulted in the cancellation of another cruise.
Issue. Do Plaintiff’s terms and conditions govern the agreement between the parties?
Held. No. Plaintiff accepted Defendant’s terms and conditions by accepting Defendant’s counteroffer.
Mixed maritime contracts for goods and services are treated the same as land-based mixed contracts. Because this case involves primarily services and not goods, common law doctrines, not the UCC, applies.
Under the common law, if an acceptance varies from the offer’s terms, the acceptance is a counteroffer and operates as a rejection of the original offer. Defendant’s final price quotation was a counteroffer. By giving Defendant permission to proceed with the inspection and repairs, Plaintiff accepted Defendant’s final price quotation. In addition, Plaintiff did not object to Defendant’s letter of confirmation and paid the amount of the final price quotation, not the purchase order. Therefore, the Court holds that Defendant’s terms and conditions included in the final price quote govern the liability and damages under the parties’ contract.
Discussion. In the present case, the Court found that Plaintiff accepted Defendant’s counteroffer through both words and actions. Therefore, the terms and conditions contained in Defendant’s counteroffer apply. It is important to note that this is the result under common law. If the UCC had applied, the analysis would be different.