Idaho Power Co. v. Westinghouse Elec. Corp.
| Decision Date | 14 May 1979 |
| Docket Number | No. 77-2752,77-2752 |
| Citation | 596 F.2d 924 |
| Parties | 26 UCC Rep.Serv. 638 IDAHO POWER COMPANY, Plaintiff-Appellant, v. WESTINGHOUSE ELECTRIC CORPORATION, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Thomas N. Ambrose, Boise, Idaho, for plaintiff-appellant.
R. B. Kading, Jr., Michael E. Johnson, Boise, Idaho, for defendant-appellee.
Appeal from the United States District Court for the District of idaho.
Before WRIGHT and GOODWIN, Circuit Judges, and BRUCE R. THOMPSON, Senior District Judge. *
We affirm the dismissal by summary judgment of Idaho Power Company's damage suit against Westinghouse Electric. The action alleged that Westinghouse was liable on theories of warranty, negligence, and strict liability for damages caused by a defective voltage regulator which it manufactured and sold to Idaho Power.
On appeal, Idaho Power argues that (1) the district court erred in concluding that limitations of liability in the Westinghouse sales form were part of the contract between the parties, and that (2) even if they were part of the contract, Westinghouse could not disclaim strict liability.
On January 12, 1973, Idaho Power sent an inquiry to Westinghouse asking its price for a three-phase voltage regulator. Westinghouse responded on January 25 with a price quotation which provided that it was subject to the terms and conditions on the back of the form.
The terms limited Westinghouse's liability, providing that it would not be liable "for special, indirect, incidental, or consequential damages," and that its liability, "whether in contract, in tort, under any warranty, or otherwise, . . . shall not exceed the price of the product or part on which such liability is based."
The form also limited the contract by this language:
The above terms, together with those set forth or referred to on the face of this quotation and such others as may be accepted by Westinghouse in writing, constitute the entire agreement for the sale of the product.
Idaho Power responded with a purchase order describing the regulator and referring to Westinghouse's price quotation. Idaho Power's order form provided, "acceptance of this order shall be deemed to constitute an agreement upon the part of the seller to the conditions named hereon and supersedes all previous agreements." Although it contained additional terms regarding shipping charges, it did not limit Westinghouse's liability.
Idaho Power received and installed the regulator in June, 1974. The equipment allegedly failed on July 31, causing a fire which damaged it and other machinery.
Westinghouse repaired the regulator at its expense, but Idaho Power sought $21,241.52 for other damages on theories of negligence, breach of implied and express warranty, and strict liability in tort. The summary judgment of dismissal was based on the liability limitations in Westinghouse's sales form.
Idaho Power concedes that Westinghouse's price quotation and sales form was an offer. It argues, however, that its purchase order was not an effective acceptance. 1 It contends, alternatively, that if the order constituted acceptance, the liability limitations were not a part of the resulting contract. Finally, it argues that the disclaimer, if a part of the contract, was not an effective defense to its strict liability action.
Acceptance.
This issue is controlled by U.C.C. § 2-207(1), Idaho Code § 28-2-207(1), which provides 28-2-207. Additional terms in acceptance or confirmation. (1) 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.
Idaho Power contends first that this provision is inapplicable because its purchase order was not a "seasonable expression of acceptance or a written confirmation." It points to the printed language in its order form, which purported to restrict the agreement to its terms.
Under common law, its purchase order would have failed as an acceptance since it varied from the offer's terms. 1 Williston, The Law of Contracts § 73 (3d ed. 1957). Section 207, however, rejects the "mirror image" rule, and converts a common law counteroffer into an acceptance even though it states additional or different terms. C. Itoh & Co. (American), Inc. v. Jordan International Co., 552 F.2d 1228, 1232-35 (7th Cir. 1977); Hohenberg Bros. Co. v. Killebrew, 505 F.2d 643, 645-46 (5th Cir. 1974); Dorton v. Collins & Aikman Corp., 453 F.2d 1161, 1168 (6th Cir. 1972); Steiner v. Mobil Oil Corp., 20 Cal.3d 90, 99-100, 141 Cal.Rptr. 157, 163-64, 569 P.2d 751, 757 (1977).
The Official Comments to § 207 state:
2. Under this Article (Chapter) a proposed deal which in commercial understanding has in fact been closed is recognized as a contract. Therefore, any additional matter contained . . . in the writing intended to close the deal . . . falls within subsection (2) and must be regarded as a proposal for an added term . . . .
Here, Idaho Power's order referred to and accepted the price quoted in Westinghouse's offer. It requested shipment within the time limits specified by Westinghouse. No other correspondence ensued and the regulator was shipped and installed accordingly. In commercial transactions such an order, especially when followed by performance, would normally be understood to have closed the deal between the parties. Consequently, it was a "seasonable expression of acceptance," even though it contained the additional terms. 2
Idaho Power next attempts to invoke the proviso to § 207(1), arguing that, if its purchase order constituted acceptance, it was "expressly made conditional on assent" to additional terms. We disagree.
The proviso has been construed narrowly. The court in Dorton v. Collins & Aikman Corp., 453 F.2d 1161, 1168 (6th Cir. 1972), held that it was intended to apply "only to an acceptance which clearly reveals that the offeree is unwilling to proceed with the transaction unless he is assured of the offeror's assent to the additional or different terms therein." It concluded that an acceptance " 'subject to all of the terms and conditions on the face and reverse side hereof, . . . all of which are accepted by the (offeror),' " was not "expressly made conditional on assent" within the meaning of § 207. Id. at 1167-68. See also C. Itoh & Co., 552 F.2d at 1234-35.
Idaho Power relies upon similar language to demonstrate that acceptance, if any, was conditional on asset. Its purchase order form states: "Acceptance of this order shall be deemed to constitute an agreement to the conditions named hereon and supersedes all previous agreements."
By this language, Idaho Power attempted to alter the terms of the offer. As in Dorton, however, the language used does not clearly reveal that Idaho Power was "unwilling to proceed with the transaction unless . . . assured of (Westinghouse's) assent to the additional or different terms." Consequently, the proviso in § 207(1) does not apply.
The Terms of the Contract.
Idaho Power also contends that even if the purchase order was an effective acceptance under § 207(1), the disclaimer in Westinghouse's form is not part of the contract. It relies on Southern Idaho Pipe & Steel v. Cal-Cut Pipe & Supply, Inc., 98 Idaho 495, 567 P.2d 1246 (1977), Dismissed, 434 U.S. 1056, 98 S.Ct. 1225, 55 L.Ed.2d 757 (1978).
In Southern Idaho Pipe, the court held that when a contract is formed under § 207 by documents with conflicting terms, those terms cancel out, leaving the court to supply the contested term. It reasoned that under such circumstances the offeror's terms should not be conclusive simply because its document was sent first. Id., 567 P.2d at 1253-55. The court then omitted from the contract terms which provided different delivery dates.
Here, Idaho Power's form did not contest Westinghouse's disclaimer. It merely purported to "supersede all previous agreements." At best, the term conflicted with Westinghouse's integration clause. We conclude that it did not nullify the disclaimer.
Because the disclaimer in the Westinghouse offer was part of the contract, the district court did not err in granting summary judgment of Idaho Power's actions based on negligence or warranty. 3 Idaho Power argues, however, that the disclaimer is not a defense to its strict liability action.
Disclaimer of Strict Liability.
The Idaho Supreme Court has adopted § 402A of the Restatement (Second) of Torts, dealing with strict liability. Shields v. Morton Chemical Co., 95 Idaho 674, 518 P.2d 857 (1974). Comment M of that section suggests that strict liability cannot be disclaimed:
The rule stated in this Section is not governed by the provisions of the Uniform Sales Act, or those of the Uniform Commercial Code, as to warranties; and it is not affected by limitations on the scope and content of warranties, or by limitation to "buyer" and "seller" in those statutes. . . . The consumer's cause of action does not depend upon the validity of his contract with the person from whom he acquires the product, and it is not affected by any disclaimer or other agreement, whether it be between the seller and his immediate buyer, or attached to and accompanying the product into the consumer's hands.
Restatement (Second) of Torts, § 402A at 356.
On the other hand, the Uniform Commercial Code, Idaho Code §§ 28-1-101 Et seq., is tolerant of disclaimers. It provides:
(a) the agreement may . . . limit or alter the measure of damages recoverable under this chapter, as by limiting the buyer's remedies to return of the goods and repayment of the price or to repair and replacement of nonconforming goods or parts;
(3) Consequential damages may be limited or excluded unless the...
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