Leonard Pevar Co. v. Evans Products Co.

• Decision Date: 13 October 1981
• Docket Number: Civ. A. No. 80-290.
• Citation: 524 F. Supp. 546
• Parties: The LEONARD PEVAR COMPANY, Plaintiff, v. EVANS PRODUCTS CO., Defendant.
• Court: U.S. District Court — District of Delaware

524 F. Supp. 546

The LEONARD PEVAR COMPANY, Plaintiff, v. EVANS PRODUCTS CO., Defendant.

Civ. A. No. 80-290.

United States District Court, D. Delaware.

October 13, 1981.

David R. Hodas of Potter & Carmine, P. A., Wilmington, Del., for plaintiff.

William H. Sudell, Jr. and Francis Babiarz of Morris, Nichols, Arsht & Tunnell, Wilmington, Del., for defendant.

MEMORANDUM OPINION

LATCHUM, Chief Judge.

This is a diversity action¹ by the Leonard Pevar Company ("Pevar") against the Evans Products Company ("Evans") for an alleged breach of express and implied warranties in Evans' sale to Pevar of medium density overlay plywood. Defendant denies liability, claiming that it expressly disclaimed warranties and limited its liability in its contract with Pevar. The parties agree that their respective rights and liabilities in this action are governed by the Uniform Commercial Code.² The parties have filed cross motions for summary judgment pursuant to Rule 56, F.R.Civ.P.³ This Court will deny both motions because it finds material facts that are in genuine dispute.

I. FACTS

In the fall of 1977, Pevar began obtaining price quotations for the purchase of medium density overlay plywood to be used in the construction of certain buildings for the State of Pennsylvania.⁴ As part of this process, Pevar's contract administrator, Marc Pevar, contacted various manufacturers of this product.⁵ Evans was one of the manufacturers contacted and was the supplier that quoted the lowest price for this material.⁶

On October 12, 1977, Marc Pevar had a telephone conversation with Kenneth Kruger of Evans to obtain this price quotation.⁷ It is at this juncture that a material fact appears in dispute that precludes this Court from granting summary judgment. Pevar claims that on October 14 it again called Evans, ordered plywood, and entered into an oral contract of sale.⁸ Evans admits that Pevar called Evans, but denies that Evans accepted that order.⁹

After the October 14th telephone conversation, Pevar sent a written purchase order to Evans for the plywood.¹⁰ In the purchase order, Pevar did not make any reference to warranties or remedies, but simply ordered the lumber specifying the price, quantity and shipping instructions.¹¹ On October 19, 1979, Evans sent an acknowledgment to Pevar stating, on the reverse side of the acknowledgment and in boilerplate fashion, that the contract of sale would be expressly contingent upon Pevar's acceptance of all terms contained in the document.¹² One of these terms disclaimed most warranties and another limited the "buyer's remedy" by restricting liability if the plywood proved to be defective.¹³

II. STATUTE OF FRAUDS

Evans contends that if Pevar and Evans entered into an oral contract, it would be unenforceable because it would be in violation of the statute of frauds. Section 2-201(1) generally provides that an oral contract for the sale of goods in excess of $500 is unenforceable. Section 2-201(2), however, provides an exception. If a written confirmation is sent to the receiving party, and the receiving party does not object to the confirmation within ten days, then the oral agreement may be enforceable. The Court finds that Pevar's written purchase order constituted a confirmatory memorandum¹⁴ and Evans' acknowledgment failed to provide sufficient notice of objection to Pevar's confirmation. The acknowledgment did not deny expressly the existence of the purported contract; rather, it merely asserted additional terms.¹⁵ Thus, the statute of frauds will not bar Pevar from proving the existence and terms of the contract for the reasons given in Marlene Industries Corp. v. Carnac Textiles, Inc., 45 N.Y.2d 327, 408 N.Y.S.2d 410, 380 N.E.2d 239, 240 (1978) where the Court stated:¹⁶

This case presents a classic example of the "battle of the forms," and its solution is to be derived by reference to section 2-207 of the Uniform Commercial Code which is specifically designed to resolve such disputes. ... Subsection (2) of section 2-201 is not applicable, for that statute deals solely with the question whether a contract exists which is enforceable in the face of a Statute of Frauds defense; it has no application to a situation such as this, in which it is conceded that a contract does exist and the dispute goes only to the terms of that contract. In light of the disparate purposes of the two sections, application of the wrong provision will often result in an erroneous conclusion. As has been noted by a recognized authority on the code, "(t)he easiest way to avoid the miscarriage this confusion perpetrates is simply to fix in mind that the two sections have nothing to do with each other. Though each has a special rule for merchants sounding very much like the other, their respective functions are unrelated. Section 2-201(2) has its role in the context of a challenge to the use of the statute of frauds to prevent proof of an alleged agreement, whereas the merchant rule of section 2-207(2) is for use in determining what are the terms of an admitted agreement." (Duesenberg, General Provisions, Sales, Bulk Transfers and Documents of Title, 30 Business Law 847, 853).

See also C. Itoh & Co. (America) Inc. v. Jordan International Co., 552 F.2d 1228, 1233 (C.A.7, 1977). Section 2-201, therefore, has no application to this case; this action involves the application of § 2-207.

III. BATTLE OF THE FORMS

Turning now to Section 2-207, it provides:

(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.

(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

(a) the offer expressly limits acceptance to the terms of the offer;

(b) they materially alter it; or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consists of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.

Section 2-207 was intended to eliminate the "ribbon matching" or "mirror" rule of common law, under which the terms of an acceptance or confirmation were required to be identical to the terms of the offer or oral agreement, respectively. Dorton v. Collins & Aikman Corp., 453 F.2d 1161 (C.A.6, 1972). The drafters of the Code intended to preserve an agreement, as it was originally conceived by the parties, in the face of additional material terms included in standard forms exchanged by merchants in the normal course of dealings. Alan Wood Steel Co. v. Capital Equipment Enterprises Inc., 39 Ill.App.3d 48, 349 N.E.2d 627 (1976). Section 2-207 recognizes that a buyer and seller can enter into a contract by one of three methods. First, the parties may agree orally and thereafter send confirmatory memoranda. § 2-207(1). Second, the parties, without oral agreement, may exchange writings which do not contain identical terms, but nevertheless constitute a seasonable acceptance. § 2-207(1). Third, the conduct of the parties may recognize the existence of a contract, despite the previous failure to agree orally or in writing. § 2-207(3).

A. Oral agreement followed by confirmation.

Section 2-207(1) applies to those situations where an "oral agreement has been reached ... followed by one or both of the parties sending formal memoranda embodying the terms so far as agreed upon and adding terms not discussed." Uniform Commercial Code, Comment 1 to § 2-207. These additional terms are treated as proposals under 2-207(2) and will become part of the agreement unless they materially alter it. Dorton, supra, 453 F.2d at 1169-70.¹⁷

In the present case, paragraphs 9 and 12 of Evans' acknowledgment, which disclaimed warranties and limited liability,¹⁸ may include terms not in the original agreement. Generally, these types of clauses "materially alter" the agreement. Uniform Commercial Code, Comment 4 to § 2-207. Nevertheless, the question of a material alteration rests upon the facts of each case.¹⁹See Dorton, supra, 453 F.2d at 1169 n.8; Medical Development Corp. v. Industrial Molding Corp., 479 F.2d 345, 348 (C.A.10, 1973); Ebasco Services Inc. v. Pennsylvania Power & Light Co., 402 F.Supp. 421, 442 (E.D.Pa.1975). If the trier of fact determines that the acknowledgment includes additional terms which do not materially alter the oral agreement, then the terms will be incorporated into the agreement. If they materially alter it, however, the terms will not be included in the agreement, and the standardized "gap filler" provisions of Article Two will provide the terms of the contract. If the facts reveal that no oral agreement was created, then § 2-207(1) may still apply, but in a different manner.

B. Written documents not containing identical terms.

The second situation in which § 2-207(1) may apply is where the parties have not entered into an oral agreement but have exchanged writings which do not contain identical terms. If the Court determines that Pevar and Evans did not orally agree prior to the exchange of documents, then this second situation may apply. In such a case, both Pevar and Evans agree that Pevar's purchase order constituted an offer to purchase. The parties, however, disagree with the characterization of Evans' acknowledgment and Pevar's acceptance of and payment for the shipped goods. Evans contends that the terms disclaiming warranties and limiting...