Herm Hughes & Sons, Inc. v. Quintek, 900529-CA

• Citation: 834 P.2d 582
• Decision Date: 05 June 1992
• Docket Number: No. 900529-CA,900529-CA
• Court: Court of Appeals of Utah
• Parties: 19 UCC Rep.Serv.2d 38 HERM HUGHES & SONS, INC., a Utah corporation, Plaintiff and Appellant, v. QUINTEK, a Utah corporation, Defendant and Appellee.

Page 582

834 P.2d 582

19 UCC Rep.Serv.2d 38

HERM HUGHES & SONS, INC., a Utah corporation, Plaintiff and Appellant, v. QUINTEK, a Utah corporation, Defendant and Appellee.

No. 900529-CA.

Court of Appeals of Utah.

June 5, 1992.

Clark B. Fetzer and Patrick S. Hendrickson, Salt Lake City, for plaintiff and appellant.

D. David Lambert and Danielle M. Ferron, Provo, for defendant and appellee.

Before BILLINGS, JACKSON and RUSSON, JJ.

AMENDED OPINION ¹

RUSSON, Judge:

Herm Hughes & Sons, Inc. (Hughes) appeals the trial court's ruling that no contract existed between Hughes and Quintek. We affirm.

I. FACTS

Hughes is a general contractor doing business in the state of Utah. In October 1983, Hughes, in preparing a bid for construction of an elementary school in Roy, Utah, solicited bids from area subcontractors. Quintek, a subcontractor, prepared a bid to provide roof trusses for the project, which bid proposal was communicated by telephone to Hughes on October 25, 1983. The bid proposal was also reduced to writing and mailed to Hughes that same day. Quintek's written bid proposal specified that the offer was to be accepted within ten days and provided a signature line at the bottom of the document for Hughes to indicate its acceptance within that period.

Hughes received Quintek's bid proposal on October 27, 1983, but did not respond to Quintek's proposed offer within the ten-day limit. In mid-November 1983, after the ten-day period had run, Boyd Jacobsen, President of Quintek, contacted Hughes by telephone to inquire about a contract. A few days later, Jacobsen went to Hughes's offices and again inquired about a contract and requested a set of plans. At that time, Hughes delivered a supplier's agreement to Jacobsen and told him that if he was "going to do the job, [he would have] to sign [that] agreement."

Quintek refused to sign the supplier's agreement because of material changes from its bid proposal. Specifically, Quintek contends that Hughes's supplier's agreement contradicted Quintek's offer by accounting for an eight-percent discount without requiring payment within ten days of invoice per Quintek's offer. The agreement also differed from the bid proposal by permitting Hughes to retain ten percent of the purchase price until completion of the project. Finally, the supplier's agreement added the following provisions, to which Quintek objected: (1) a provision obligating Quintek to Hughes for the obligations Hughes had to the owner, (2) a liquidated damages provision, and (3) an indemnification provision.

During the period from December 1983 to February 1984, Hughes and Quintek continued negotiations concerning the prospect of Quintek's supplying the trusses for the project. In December 1983, Quintek submitted a single shop drawing to Hughes with the explanation that in the event a contract could be negotiated, the drawings would need to be processed in order for Quintek to begin work on schedule. However, no trusses were ever manufactured.

In February 1984, Quintek, still pursuing a contract with Hughes, prepared and submitted a new bid proposal to Hughes to provide the trusses. This bid proposal was higher than the initial bid submitted in October 1983 due to increased material costs. Hughes rejected Quintek's proposal and ultimately accepted a bid for the trusses from another contractor.

In June 1984, Hughes commenced an action against Quintek for breach of contract, seeking damages in the amount of $8,695.44, the difference between Quintek's initial bid and the price that Hughes ultimately paid for the trusses. At trial, the circuit court ruled that Hughes had failed to establish the existence of a contract between the parties. Hughes appeals that decision.

II. ANALYSIS

The sole issue on appeal is whether the trial court erred in ruling that no contract existed between Hughes and Quintek for the supply of roof trusses. Whether a contract exists between parties is a question of law; therefore, we review the trial court's conclusion of law under a correction of error standard. Bailey v. Call, 767 P.2d 138, 139 (Utah App.), cert. denied, 773 P.2d 45 (Utah 1989); accord Scharf v. BMG Corp., 700 P.2d 1068, 1070 (Utah 1985).

Hughes asserts that a contract was formed when it delivered the supplier's agreement to Jacobsen in response to Quintek's bid proposal. Hughes contends that although it failed to respond to Quintek's original bid proposal within the specified ten-day limit, that offer was renewed when Jacobsen telephoned and later personally contacted Hughes requesting a contract to supply the trusses for the project. Hughes argues that when it delivered the supplier's agreement to Jacobsen, that agreement, despite its additional terms, constituted an acceptance of Quintek's offer, pursuant to Utah Code Ann. § 70A-2-207(1) (1990), which provides:

A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

Alternatively, Hughes argues that a contract was formed by the parties' conduct.

Quintek responds that no contract ever existed between Hughes and Quintek, and that section 70A-2-207 only applies when a contract already exists and the sole dispute concerns the contract's terms. Thus, Quintek argues, that section does not apply in the present case. Additionally, Quintek contends that a contract was not formed by the parties' conduct. We agree.

Prior to addressing Hughes's claim that its supplier's agreement was a valid acceptance under section 70A-2-207(1), which relates to different or additional terms contained in an acceptance, it must first be determined whether an underlying agreement between Hughes and Quintek existed, pursuant to Utah Code Ann. § 70A-2-204(1) (1990), which states: "A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract." Id. (emphasis added).

In construing the Uniform Commercial Code, courts in other jurisdictions, as well as legal commentators, have consistently recognized the necessity of finding an underlying agreement pursuant to U.C.C. § 2-204 as a prerequisite to the application of U.C.C. § 2-207. In U.S. Indus., Inc. v. Semco Mfg., Inc., 562 F.2d 1061 (8th Cir.1977), the court stated:

"Only where all the traditional criteria of intent are met showing that a contract has been made should Section 2-207 be applied; only then should the prescriptions of Section 2-207 as to additional terms become relevant." R. Duesenberg & L. King, Bender's Uniform Commercial Code Service § 3.05, at 3-51 (1977). See Duval & Co. v. Malcom, 233 Ga. 784, 214 S.E.2d 356 (Ga.1975). The court here must interpret the terms of the offer and the acceptance, which are stated differently, to determine if the return document diverges significantly as to a dickered term....

Id. at 1067 (emphasis in original) (footnote omitted).

Further, in Koehring Co. v. Glowacki, 77 Wis.2d 497, 253 N.W.2d 64 (1977), the Wisconsin Supreme Court stated that "before we reach the question of additional or different terms added to a contract, we must first inquire whether or not any contract ever existed." Id. at 67; accord Marlene Indus. Corp. v. Carnac Textiles, Inc., 45 N.Y.2d 327, 408 N.Y.S.2d 410, 380 N.E.2d 239, 240-41 (1978).

Finally, Anderson on the Uniform Commercial Code states:

UCC § 2-207 is based on the assumption that it is admitted that there is a contract and the controversy is only as to its terms.

There must be a contract in order for UCC § 2-207 to apply. "[UCC § 2-207] does not apply if the general contract formation rules of [UCC § 2-204] are not met. [UCC § 2-207] does not change the traditional rule that, in order to create an enforceable contract, the parties must mutually assent to all essential terms of the supposed agreement."

UCC § 2-207 does not apply unless there is first a pre-existing contract between the parties. The provision is not applicable when there never was a contract because a qualified acceptance had been made.

2 Ronald A. Anderson, Anderson on the Uniform Commercial Code § 2-207:7 at 274 (3d ed. 1982) (footnotes omitted).

Therefore, as a threshold issue, we must determine whether there was a "meeting of the minds" sufficient to establish the existence of an agreement between Hughes and Quintek under section 70A-2-204(1). See Koehring, 253 N.W.2d at 67-68.

We turn first to Quintek's offer. Quintek contends that its offer to supply the trusses expired by its own terms prior to any acceptance by Hughes. Hughes responds that although it failed to respond to Quintek's original bid proposal within the specified ten-day limit, that offer was renewed when Jacobsen telephoned and later...