Uniroyal, Inc. v. Chambers Gasket & Mfg. Co.

• Citation: 380 N.E.2d 571,177 Ind.App. 508
• Decision Date: 19 September 1978
• Docket Number: No. 2-476A127,2-476A127
• Parties: , 24 UCC Rep.Serv. 1109 UNIROYAL, INC., Appellant, (Third-Party Defendant below), v. CHAMBERS GASKET AND MANUFACTURING COMPANY, Appellee, (Third-Party Plaintiff and Defendant below), Thrush Products, Appellee, (Plaintiff below).
• Court: Indiana Appellate Court

Page 571

380 N.E.2d 571

177 Ind.App. 508, 24 UCC Rep.Serv. 1109

UNIROYAL, INC., Appellant, (Third-Party Defendant below), v. CHAMBERS GASKET AND MANUFACTURING COMPANY, Appellee,

(Third-Party Plaintiff and Defendant below),

Thrush Products, Appellee, (Plaintiff below).

No. 2-476A127.

Court of Appeals of Indiana, Second District.

Sept. 19, 1978.

Eugene J. McGarvey, Jr., Thomas J. Trauring, Fell & McGarvey, Kokomo, for appellant

George C. Rabens, Rabens, Formusa & Glassman, Chicago, Ill., Russell T. Keith, Keith, Berkshire & Keith, Peru, for appellee.

SULLIVAN, Judge.

Thrush Products (Thrush) requested that Chambers Gasket and Manufacturing Company (Chambers) fabricate gaskets for use by Thrush in the manufacture and sale of pressure reducing valves. The material normally used in such fabrication was unavailable. Therefore, Chambers inquired of Uniroyal, Inc. (Uniroyal), a supplier of raw material, whether there existed a reasonable substitute and if so, that Chambers be supplied with a sample. Uniroyal responded that a substitute was indeed available and a sample of such material was submitted, although there is some conflict whether the sample was sent directly to Thrush or routed through Chambers to Thrush. In any event, Thrush, after testing a gasket fabricated from the sample, was satisfied and notified Chambers to begin the fabrication process. Chambers, in turn, mailed a purchase order to Uniroyal, specifying the quantity of material desired, the price therefor, and the date for shipment. Uniroyal replied to the purchase order with an "Order Acknowledgment" which stated:

"WE ACKNOWLEDGE AND THANK YOU FOR YOUR ORDER. OUR ACCEPTANCE OF THE ORDER IS CONDITIONAL ON THE BUYER'S ACCEPTANCE OF THE CONDITIONS OF SALE PRINTED ON THE REVERSE SIDE HEREOF. IF BUYER DOES NOT ACCEPT THESE CONDITIONS OF SALE, HE SHALL NOTIFY SELLER IN WRITING WITHIN SEVEN (7) DAYS AFTER RECEIPT OF THIS ACKNOWLEDGMENT."

The "Conditions of Sale" on the reverse side provided, in pertinent part 4. The Seller's products are not guaranteed for any specific length of time or measure of service, but are warranted only to be free from defects in workmanship and material, and all goods shall be subject to Seller's normal manufacturing tolerances. There are no warranties, express or implied, of merchantability, fitness, or otherwise which extend beyond those stated in the sentence immediately prior to this one and the name, code, or size, or in their absence, other identifying designation of the goods, exclusive of performance characteristics, contained in the description appearing on Seller's quotation form, or in its absence, on Buyer's Purchase Order form.

Buyer's exclusive remedy for breach of any warranty is limited to a refund of the purchase price of the merchandise, or at the Seller's option, to replacement upon its return. Under no circumstances shall the Seller be responsible for consequential damages.

No claim for any breach of warranty herein shall be considered unless delivered in writing to the Seller within thirty (30) days after date of delivery of the first shipment with respect to which claim is made.

This procedure was employed by the parties each time a new order was placed, followed by shipment and delivery of the goods.

Thrush thereafter determined the gaskets to be defective, and initiated suit against Chambers for breach of express and implied warranties. Chambers filed a Third-Party complaint against Uniroyal, pursuant to Ind.Rules of Procedure, Trial Rule 14, and in addition, "vouched-in" Uniroyal under the provisions of the Uniform Commercial Code, ¹ claiming a right of indemnity in the event Chambers was found liable to Thrush. Uniroyal, however, did not accept Chambers' tender of its defense. The trial of the two claims was severed and, after the first trial, Thrush recovered a judgment against Chambers. Thereafter, both Chambers and Uniroyal moved for summary judgment on the indemnity claim, and the trial court granted judgment in Chambers' favor. Uniroyal's appeal from that judgment, now before us, claims sixteen specific errors, most of which are related to the validity of the "Conditions of Sale" which purported to disclaim warranties, establish a time limit for notice of an alleged breach, and limit Uniroyal's liability to a refund of the purchase price. Uniroyal further alleges procedural irregularities as reversible error.

CONTRACT FORMATION

The case before us presents, in classic manner, the "battle of the forms" an issue which requires that we determine whether the writings of the parties created a contract and if so, the terms of that contract.

The trial court and the parties seem to concede the applicability of § 2-207, ² but the arguments and decision below reflect a fundamental misunderstanding of the purpose and effect of that statute. Therefore, we briefly discuss the basic principles of common-law contract formation and the Uniform Commercial Code's modification of those rules.

At common-law, "for an offer and an acceptance to constitute a contract, the acceptance must meet and correspond with the offer in every respect, neither falling within nor going beyond the terms proposed, but exactly meeting (those terms) at all points and closing with them just as they stand." Gates v. Petri (1957) 127 Ind.App. 670, 143 N.E.2d 293, 297. An acceptance which varies the terms of the offer is considered a rejection and operates as a counter-offer, which may be accepted by the original offeror by performing without objection under the terms contained in the counter-offer.

§ 2-207 was specifically designed to alter the common-law "mirror-image" rule. Nordstrom, Handbook of the Law of Sales § 37 (1970). The drafters recognized that in commercial practice, especially with the advent of printed forms, the terms of the "offer' and "acceptance" were seldom the same. They further recognized that the parties to a commercial transaction seldom were aware of the conflicting terms and conditions contained in the printed forms they exchanged. § 2-207 was therefore designed to allow enforcement of an agreement despite discrepancies between offer and acceptance, if enforcement could be required without either party being bound to a material term to which he has not agreed. American Parts Co., Inc. v. American Arbitration Ass'n (1967) 8 Mich.App. 156, 154 N.W.2d 5, 12.

In order to give effect to the expectations of the parties, § 2-207 recognizes that ". . . a proposed deal which in commercial understanding has in fact been closed is recognized as a contract." Uniform Commercial Code § 2-207, Official Comment 2. Thus, "(a) definite and seasonable expression of acceptance . . . operates as an acceptance even though it states terms additional to or different from those offered or agreed upon . . ." § 2-207(1). If a contract is recognized under sub-section (1), the additional terms in the acceptance are treated as proposals for additions to the contract which, as between merchants, become part of the contract unless certain specified conditions render the proposals inoperative. § 2-207(2).

However, if an acceptance is expressly conditioned on the offeror's assent to the new terms, and no assent is forthcoming, the "entire transaction aborts." Dorton v. Collins & Aikman Corp. (6th Cir. 1972) 453 F.2d 1161, 1166; Falcon Tankers, Inc. v. Litton Systems, Inc. (Del.Super.1976) 355 A.2d 898, 906. In other words, ". . . the consequence of a clause conditioning acceptance on assent to the additional or different terms is that as of the writings, there is no contract." Deusenberg & King, Sales and Bulk Transfers § 3.06(3)(a) (1977). Yet if the parties' conduct recognizes the existence of a contract by performance (see §§ 2-204, 2-206) it is sufficient to establish a contract for sale. In such case, the terms of the contract are those on which the writings of the parties agree, together with supplemental provisions of the Code. ³ § 2-207(3). See also, Williston on Sales § 7-5 (4th Ed. 1973).

In the context of this analytic framework, we begin our consideration of the present appeal by examining the findings of the trial court:

"I. The following facts appear from the Motions, Exhibits, Affidavits, Depositions, Memoranda, and Briefs filed herein, and from the evidence adduced at the trial upon the Complaint of Thrush vs. Chambers, to be agreed upon or established without any genuine issue thereon:

A. At all times pertinent Uniroyal has manufactured and sold materials to Chambers which were cut by it and sold and delivered to Thrush.

B. The materials purchased by Chambers from Uniroyal were resold by Chambers to Thrush in the form of the diaphragms which were cut by Chambers.

C. That the materials purchased by Chambers from Uniroyal were for use in the manufacture and assembly of pressure reducing valves by Thrush.

D. That the material was recommended by Uniroyal as being suitable for use by Thrush in the assembly and manufacture of valves for it and for resale to customers of Thrush.

E. That the diaphragms, manufactured out of the materials by Chambers, were thereupon used by Thrush as understood and intended by all the parties.

F. That some of the materials did not conform to the samples originally furnished by Uniroyal and were not of substantially the same kind and quality thereof.

G. That the materials contained latent defects which permitted leakage of water and ineffective use in the valves assembled by Thrush.

H. That damages resulted to both Thrush and Chambers as a result of any (sic) defects in the materials.

I. That Thrush has sustained damage of $4,076.56, the amount paid by it for the gaskets, and resultant or consequential damages in the amount of $11,737.05, a total of $15,813.61 as a direct result of the gaskets being defective, unfit for the use intended, and in varying from samples originally furnished by Uniroyal.

J. That Chambers was legally justified in relying upon Uniroyal to supply it with...