Citation. 110 F.3d 184 (1st Cir. 1997)
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Brief Fact Summary.
Ionics, Inc., (Plaintiff), purchased thermostats from Elmwood Sensors, Inc., (Defendant) which Plaintiff installed in its water dispensers. Plaintiff alleges that these thermostats were defective and caused the dispensers to catch fire. Defendant appeals the trial court’s ruling against its motion for partial summary judgment.
Synopsis of Rule of Law.
U.C.C. 2-207(3) governs when the buyer and seller act as if there is a contract even though their supposed written acceptance does not qualify as a valid legal acceptance.
Plaintiff’s purchase order included language stating that the contract would be governed by the terms included in its purchase order. These terms reserved to Plaintiff all remedies available under State law and required that Defendant state any objections to these terms in writing. Defendant sent Plaintiff an Acknowledgement stating that the contract was governed by the terms in the Acknowledgement, one of which limited Defendant’s liability. Plaintiff was given ten days to reject this “counteroffer.”
Plaintiff installed the thermostats in its water dispensers. Some of the dispensers caused fires. Plaintiff alleged these fires were the product of defective thermostats. Plaintiff sued to recover costs incurred as a result of the fire. Defendant moved for partial summary judgment. The District Court of Massachusetts certified to the First Circuit Court of Appeals the question of whether in the circumstances of this case, U.C.C. Section:2-207 has been properly applied.
Defendant argues that Roto-Lith, Ltd. v. F.P. Bartlett & Co., 297 F.2d 497 (1st Cir. 1962), governs. There the court held that a response which states a condition materially altering the obligation solely to the disadvantage of the offeror is an acceptance expressly conditional on assent to the additional terms. Plaintiff’s acceptance of the thermostats with the knowledge of the conditions specified in the Acknowledgment binds Plaintiff to Defendant’s limited liability.
Plaintiff maintains that Roto Lith does not govern because in that case, the seller’s language was not in conflict with the explicit terms in buyer’s form but in addition to them. The terms here are in direct conflict with each other and reject each other as per Section:2-207(3).
Whether a contract is governed by the language after the comma in Section:2-207(1) of the U.C.C. or whether it is governed by subsection (3).
No. The contract is governed by Section:2-207(3).
Defendant urged the court to apply Roto-Lith, Ltd. v. F.P. Bartlett & Co., 297 F.2d 497 (1st Cir. 1962). In Roto-Lith the court held that a response that states a condition materially altering the obligation solely to the disadvantage of the offeror is an acceptance expressly conditional on assent to the additional terms. Therefore, Plaintiff’s acceptance of the thermostats with the knowledge of the conditions specified in the Acknowledgment would bind Plaintiff to Defendant’s term limiting liability.
Plaintiff maintains that Roto Lith does not govern because in that case, the seller’s language was not in conflict with the explicit terms in the buyer’s form but in addition to them. The terms here are in direct conflict with each other and reject each other as per Section:2-207(3). The court disagrees with the distinction stating that it would be artificial to enforce language that conflicts with background legal rules while refusing to enforce language that conflicts with the express terms of the contract because every contract is assumed to incorporate the existing legal norms that are in place. To do so would result in longer, more complicated forms discouraging parties from reading them and further exacerbating the problem that created this case.
The court held that a plain reading of Section:2-207 indicates that subsection (3) governs. However, since the facts Roto-Lith are indistinguishable from this case the court must overrule Roto-Lith. Section:2-207(3) prevails and the terms of the contract consist of those terms on which the writings of the parties agree together with any supplementary terms incorporated under any other provisions of this chapter.