Power Press Sales Co. v. MSI Battle Creek Stamping

• Decision Date: 25 January 2000
• Docket Number: Docket No. 209485.
• Citation: 238 Mich. App. 173,604 N.W.2d 772
• Parties: POWER PRESS SALES COMPANY, Plaintiff-Appellant, v. MSI BATTLE CREEK STAMPING, a/k/a MSI Corporation, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

604 N.W.2d 772

238 Mich. App. 173

POWER PRESS SALES COMPANY, Plaintiff-Appellant, v. MSI BATTLE CREEK STAMPING, a/k/a MSI Corporation, Defendant-Appellee.

Docket No. 209485.

Court of Appeals of Michigan.

Submitted September 9, 1999, at Lansing.

Decided October 19, 1999, at 9:10 a.m.

Released for Publication January 25, 2000.

Noeske and Abbo (by Paul Abbo), for the plaintiff. Troy.

Jonathan Shove Damon, for the defendant. Grand Rapids.

Before: MURPHY, P.J., and GAGE and WILDER, JJ.

MURPHY, P.J.

Plaintiff appeals as of right from the circuit court's order denying its motion for summary disposition and granting defendant's motion for summary disposition pursuant to MCR 2.116(C)(10). The action initiated by plaintiff sought contractual indemnification from defendant for the costs associated with plaintiff's settlement of a separate personal injury action. We affirm.

By oral agreement plaintiff sold defendant a number of used power presses. Plaintiff prepared and sent to defendant a written invoice confirming the sale. In response defendant sent three checks in satisfaction of the contract price, thus performing the contract as orally agreed. The invoice, signed by neither party, and the checks were the only writings related to the sale. In addition to the contract terms the parties orally agreed to, the invoice contained an indemnity clause that had never been discussed. This clause, entitled "CONDITIONS OF SALE" and printed on the front of the invoice, stated in pertinent part:

INDEMNIFICATION: BUYER AGREES TO INDEMNIFY AND HOLD SELLER HARMLESS FROM ANY AND ALL LIABILITY, LOSS OR DAMAGES WHICH SELLER MAY SUFFER AS A RESULT OF CLAIMS, DEMANDS, COSTS OR JUDGMENTS MADE AGAINST SELLER ARISING OUT OF ANY USE WHATSOEVER OF MACHINERY AND EQUIPMENT SOLD PURSUANT TO THIS AGREEMENT....

The evidence unquestionably demonstrates that defendant did not expressly agree to the inclusion of this additional term.

Approximately five years after completion of this sale, an employee of defendant was injured while operating one of these power presses. The employee sued plaintiff and various others for damages based on theories of negligence and breach of warranties. Plaintiff settled with the employee and subsequently filed the underlying action seeking contractual indemnification from defendant based on the "CONDITIONS OF SALE" clause contained in the invoice. Defendant filed a motion for summary disposition, pursuant to MCR 2.116(C)(10), on the ground that the indemnity term never became part of the contract because under M.C.L. § 440.2207; MSA 19.2207 the invoice was only a "written confirmation" of the parties' oral agreement and the indemnity term was a material alteration that defendant did not expressly accept. Plaintiff opposed the motion, contending that defendant's acceptance of all terms contained in the invoice was indicated by its payment of the contract price without objection to the conditions. Plaintiff sought summary disposition in its favor.

At a hearing on the motions, plaintiff argued that, because the transaction was a sale of goods for over $500, the statute of frauds required a writing. Plaintiff contended that there had been no binding contract before the exchange of the invoice and the three checks because they were the only writings associated with the transaction. Thus, plaintiff argued, the invoice constituted an offer, not written confirmation of a prior agreement, and M.C.L. § 440.2207; MSA 19.2207 was inapplicable. Plaintiff also contended that defendant's failure to object to the terms on the invoice should be deemed acceptance of those terms because of a previous course of dealing between the parties wherein indemnity clauses were included on invoices. Plaintiff, however, was unable to locate any old invoices and therefore introduced no evidence of a previous course of dealing.

The circuit court indicated that the statute of frauds was inapplicable, finding that the parties did reach an oral agreement that, though perhaps initially unenforceable under the statute of frauds, became an enforceable contract once performance occurred. Thus, the court applied M.C.L. § 440.2207; MSA 19.2207 and inquired whether the indemnification clause constituted a material alteration of the parties' oral agreement. The court found that the term was a material alteration that should not be incorporated into the contract because it had not been expressly accepted. Finally, the court concluded that because there was no evidence of a previous course of dealing by which defendant's silence would constitute acceptance of additional material terms, summary disposition in defendant's favor was appropriate.

We review a trial court's decision on a motion for summary disposition de novo. Spiek v. Dep't of Transportation, 456 Mich. 331, 337, 572 N.W.2d 201 (1998). A motion under MCR 2.116(C)(10) tests the factual support for a claim. Id. In reviewing the trial court's decision, we must consider the affidavits, pleadings, depositions, admissions, and documentary evidence filed in the action or submitted by the parties to determine whether a genuine issue of any material fact exists to warrant a trial. Id.

As it did at the motion hearing, plaintiff contends that on the basis of the statute of frauds, there was no agreement before the exchange of its invoice and defendant's three checks. Plaintiff argues, therefore, that M.C.L. § 440.2207; MSA 19.2207 is inapplicable and that defendant's silence in the face of the terms contained in the invoice should be deemed acceptance of those terms. We disagree.

MCL 440.2201; MSA 19.2201 provides:

(1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500.00 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.

(2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received.

(3) A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable

(a) if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller's business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement; or

(b) if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or

(c) with respect to goods for which payment has been made and accepted or which have been received and accepted (section 2606). [Emphasis added.]

Plaintiff claims that to the extent there was any agreement regarding this transaction before it sent the invoice that contained the indemnity term, under subsection 1 that agreement is unenforceable with regard to its limited terms because it lacked a writing.¹ This statute of frauds argument, in which plaintiff suggests that the invoice was actually an offer, is inappropriate. It is clear that pursuant to the exception found in subsection 3(c), an oral agreement may become enforceable through performance. Here, the evidence undeniably demonstrates that the parties reached an oral agreement regarding quantity, price, and other minor conditions of the transaction, with no discussion of indemnity. It is also undisputed that performance occurred. The existence of an enforceable contract of sale, albeit oral, is therefore established, and the appropriate question concerns determination of the terms incorporated in that agreement.

MCL 440.2207; MSA 19.2207 controls the dispute over whether indemnification became an additional term of the parties' oral agreement on the basis of its inclusion in plaintiff's written confirmation, the invoice. This statute 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 consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this act. [Emphasis added.]

The critical question in this case is whether the additional indemnification term, contained in plaintiff's invoice that constitutes a written confirmation of the agreement, materially altered the...