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United States Court of Appeals for the First Circuit - 110 F.3d 184
Tags: Contracts, Acceptance, Offer, Battle of the forms
tl;dr:
A buyer’s offer form and a seller’s acceptance form included directly contradictory terms. The court held that only the mutually agreed upon terms were part of the contract, with the terms in dispute reverting to default terms provided by the UCC.Video Summary
Case Summary
The Ionics, Inc. v. Elmwood Sensors (1997) case, decided by the US Court of Appeals for the First Circuit, involved a thermostat sales contract.
Ionics manufactures hot and cold water dispensers. Elwood manufactures thermostats. Ionics uses Elmwood’s thermostats in its water dispensers. Ionics sent Elmwood a purchase order form which specified that all remedies available to Ionics under state law would be retained. Elmwood sent an acknowledgement form indicating that no implied warranty of merchantability would be available to the buyer and that the only remedy Elmwood would offer was repair of any defective goods.
Several of Elmwood’s thermostats were defective and caught fire. Ionics brought suit, but Elmwood argued that Ionics’s failure to expressly object to Elmwood’s limited liability clause in their acknowledgement form constituted acceptance of their terms. Elmwood’s summary judgment motion was dismissed, and the district court then certified to the U.S. Court of Appeals the question of whether the district court had properly applied Massachusetts’s statutory implementation of Uniform Commercial Code (UCC)
The court ruled the defendant's terms did not apply, and the contract was governed by U.C.C. § 2-207(3). The court reasoned that the defendant's terms were additional or different from the plaintiff's, which stated that only the plaintiff's purchase order governed the contract and reserved all remedies under state law. The court also believed the defendant's terms materially altered the contract, affecting risk and remedy distribution.
This case is significant because it highlights the "battle of forms" principle in contract law, which occurs when parties exchange conflicting or additional terms. It demonstrates that courts use U.C.C. § 2-207 to determine if disputed terms are part of the contract based on whether they are additional, different, materially alter the contract, and whether there is agreement or objection to them. The case also shows that courts consider the contract's nature and purpose and the parties' intentions in interpreting their terms.
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The court is reviewing whether § 2-207 of M.G.L. c. 106 has been properly applied in a lawsuit between Ionics, Inc. and Elmwood Sensors, Inc. over defective thermostats that caused fires in water dispensers. The purchase order included conflicting terms regarding remedies and warranties. The court ruled that the contract is governed by subsection (3) of § 2-207, which allows additional or different terms in an acceptance or written confirmation to become part of the contract unless the offer expressly limits acceptance to the terms of the offer or the additional or different terms materially alter it. The court rejected the rule established in Roto-Lith, Ltd. v. F.P. Bartlett & Co. and concluded that the buyer accepted the goods with knowledge of the conditions specified in the acknowledgment and became bound by the new terms. All contracts are assumed to incorporate the existing legal norms that are in place.
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