Empire Machinery Co. v. Litton Business Tel. Systems, Division of Litton Systems, Inc.
| Citation | 115 Ariz. 568,566 P.2d 1044 |
| Decision Date | 06 July 1977 |
| Docket Number | No. 1,CA-CIV,1 |
| Parties | , 22 UCC Rep.Serv. 309 EMPIRE MACHINERY CO., an Arizona Corporation, Appellant, v. LITTON BUSINESS TELEPHONE SYSTEMS, DIVISION OF LITTON SYSTEMS, INC., Litton Systems, Inc., a Delaware Corporation, Litcom, a division of Litton Industries, Inc., Litton Industries, Inc., a Delaware Corporation, Appellees. 3188. |
| Court | Court of Appeals of Arizona |
Ryley, Carlock & Ralston by George Read Carlock, James E. Brophy, III, N. Warner Lee, Phoenix, for appellant.
Lewis & Roca by Roger W. Kaufman, Paul G. Ulrich, Kimball J. Corson, Phoenix, for appellees.
This is a contract action in which we are called upon to determine whether execution of a "home office acceptance" clause is the exclusive means by which a contract can be made binding.
This action was instituted by Empire Machinery Co. (Empire) against Litton Systems Co. and various divisions and subsidiary companies of Litton Systems Co. (collectively referred to as Litton) seeking damages for breach of a contract to install an "interconnect" telephone system for Empire's use. On cross-motions for summary judgment, the trial court granted judgment in favor of Litton, in essence finding, as a matter of law, that a binding contract was never consummated between the parties. Empire has appealed.
The facts are not in material dispute between the parties.
Empire is the dealer for Caterpillar Tractor Company in Arizona. In the summer of 1973, Empire became interested in acquiring an "interconnect" telephone system. An "interconnect" system is one in which the telephone customer owns the "in-house" switching equipment, telephones and wiring, as compared to this equipment being owned by the telephone company, in this case, Mountain Bell. Litton is a manufacturer and seller of interconnect systems and on April 2, 1973, Russell R. Murphy, National Accounts Manager for Litton wrote Empire a letter extolling the virtues of the Litton system and enclosing a card to be returned to Litton if Empire was interested in its system. Empire returned the card and on April 17, 1973 Murphy personally contacted Empire.
During this visit, Murphy explained that Litton was developing a "Superplex" switching system which would be available in approximately a year. Mr. Ronald E. Mathis, Jr., communications coordinator for Empire, expressed interest in Litton's system which embraced the "Superplex" switch.
On June 5, 1973, Litton, through Murphy, submitted a proposal to Empire which was rejected. Negotiations continued between Murphy and Mathis until July 30, 1973. On that date, Murphy submitted a letter to Empire which stated in pertinent part that:
Following receipt of this letter from Murphy, Mr. Jack W. Whitman, president of Empire, signed an "Equipment Sales Agreement" and delivered to Murphy a check in the sum of $8,546.00, as the down payment. Murphy, on the Equipment Sales Agreement, acknowledged receipt of this amount.
This Equipment Sales Agreement contained on its face a clause which read:
At the right hand bottom of the front page, the following appeared:
It is acknowledged that Murphy did not sign this portion of the contract. It is also acknowledged that Empire's President, Mr. Whitman, read and understood paragraph 6 quoted above. The estimated date for installation of the Litton system was set at November 15, 1973.
On August 9, 1973, Mathis, on behalf of Empire, was requested by Murphy to send a form letter to Mountain Bell designating Litton as Empire's representative with authority to act in connection with the installation of the interconnect system. The form letter supplied by Litton contained the following lead paragraph:
"We have this date entered into a contractual agreement with LITTON BTS Division, Litton Systems, Inc. for the installation of an 'interconnect telephone system'."
On August 30, 1973, John Parlett, National Systems Representative for Litton, wrote Mountain Bell advising that company of the details of the installation of the interconnect system. The letter contained the following lead paragraph:
"We have this date entered into a contractual agreement with Empire Machinery Company for the installation of an 'interconnect' telephone system."
Empire, at Litton's request, purchased approximately $12,000 worth of electrical equipment to facilitate Litton's equipment.
On December 3, 1973, W. P. Scott, service manager of Litton, requested that Mountain Bell supply a new telephone number for Empire to be put in service as of December 21, 1973. Nothing further was done by either party in furtherance of the contract. Litton never shipped nor prepared the interconnect system. Apparently Litton encountered difficulties in perfecting its "Superplex" system and on January 10, 1974, Mr. E. E. Bolles, then Mountain Area Manager for Litton, met with Murphy and Mathis and advised Mathis that Litton would be unable to supply Empire with a "Superplex" interconnect telephone system. At that time Bolles tendered back Empire's down payment. This oral tender was verified by a letter the following day.
Subsequently, Empire purchased a Stromborg-Carlson interconnect telephone system in lieu of the Litton system. The electrical equipment purchased by Empire was substantially adaptable to the Stromborg-Carlson system. This litigation then ensued.
The parties have presented several issues for our determination, which may be summarized into two issues as follows:
1. Did Murphy's letter of July 30, 1973 constitute an offer to sell which was accepted by Empire executing the Equipment Sales Agreement so as to constitute a binding agreement?
2. If not, did the Equipment Sales Agreement constitute an offer by Empire to purchase which could only be accepted and made binding by Litton at its home office in accordance with paragraph 6 of that agreement?
Empire first contends that the letter from Litton dated July 30, 1973, signed by Murphy which stated "upon receipt of a signed order and deposit, Litton BTS will install an ('interconnect system') on your premises", constituted an offer to sell. They further argue that having complied with that offer by signing the Equipment Sales Agreement and giving Murphy a check in the sum of $8,546.00, they accepted that offer and a binding contract was created. The problem with this reasoning is that it ignores the express language of the Equipment Sales Agreement, stating that the agreement would become effective and binding "only upon approval, acceptance, and execution hereof by BTS and its home office." Because of this language, we believe the correct rule is that stated in 1 Corbin, Contracts § 88 (1963):
We therefore hold that Murphy's letter of July 30, 1973 constituted a request for an offer from Empire, and that the Equipment Sales Agreement was in compliance with that request and therefore an offer which required Litton's acceptance. 1
This brings us to the second issue presented, that is, the offer having designated the manner in which it would be accepted, is this the exclusive means by which that acceptance can occur? Empire has argued in this matter that future discovery might disclose that in fact Litton did accept, approve and execute the Equipment Sales Agreement. The simple answer to this contention is that Litton moved for summary judgment on the basis that the agreement was not accepted, approved or executed by "BTS and its home office". Empire did not request a continuance of this motion in order to complete discovery on this point. See Rule 56(f), Rules of Civil Procedure, 16 A.R.S. We therefore assume, for the purposes of this appeal, that there was no formal execution of the Equipment Sales Agreement by "BTS and its home office."
The crux of the problem is thus presented. Litton argues that because of clause 6 in the contract, Empire's offer was never accepted in the manner designated and therefore a binding contractual relationship never existed between the parties. Empire argues that clause number 6 can be waived by it and assented to by Litton and the conduct of Litton subsequent to the submission of the Equipment Sales Agreement shows such an assent or at least a fact issue which would preclude summary judgment. Litton counters this argument by contending that in any event, the conduct relied upon by Empire to show assent was performed by agents who had no authority to bind Litton.
As the ground floor for both Litton's and Empire's positions, both cite A.R.S. § 44-2313 (§ 2-206, Uniform Commercial Code), which provides in part:
Empire points to the language contained under paragraph 1 of ...
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