Diamond Fruit Growers, Inc. v. Krack Corp. – Case Brief
Diamond Fruit Growers, Inc. v. Krack Corp., 794 F.2d 1440 (9th Cir. 1986).
Facts: Krack (P) manufactured cooling units containing steel tubing supplied by Metal-Matic (D). For ten years the parties had followed the same course of dealing: at the beginning of each year, Krack sent Metal-Matic a blanket purchase order stating how much tubing Krack would need for the year, and later sent release purchase orders when Krack wanted the tubing shipped. Metal-Matic would then forward an acknowledgment form and ship the tubing.
Metal-Matic’s acknowledgment forms contained a disclaimer of liability to Krack for any incidental damages caused by any defect in the tubing, and made its assent expressly conditioned upon Krack’s assent to the disclaimer. P’s purchase order did not contain this provision and P never formally assented. At one point P’s purchasing manager objected to D’s liability limitations, but D did not remove the limitation and both parties continued to do business.
Diamond used one of the cooling units and sued Krack (P) for damages caused by a leak in tubing manufactured by D. P filed a third party complaint against D and D invoked the disclaimer clause in its defense. The trial court denied D’s motion for a directed verdict. D was found to be 30% responsible. D appealed the court’s denial of D’s motion for judgment n.o.v.
Issue: Under the UCC, where the terms of a purchase order and acknowledgment receipt differ and both parties perform, what are the terms of the resulting contract?
Holding and Rule: Under the UCC, where the terms of a purchase order and acknowledgment receipt differ and both parties perform, the contract will consist of those terms upon which the parties agreed, together with any supplementary terms incorporated under the UCC. See U.C.C. § 2-207 (full text below).
P and D exchanged purchase orders and acknowledgments that contained different or additional terms. The mere fact that the parties discussed the differing terms of the forms after they were exchanged does not take this case out of 2-207. All of the terms upon which the parties do not agree drop out and the UCC supplies the missing terms. P never assented and D’s argument that the subsequent dealings by P represented assent cannot be valid because the party to send the last form would have an advantage over the other party.
Assent under U.C.C. § 2-207 must be given specifically and unequivocally. The disclaimer was not agreed to and did not become a part of the contract.
U.C.C. – Article 2 -§ 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.
(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.