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Decision: Reversed. Under UCC 2-207, additional terms become part of a contract unless
Questions: 1. The forum selection clause was held to be a material change to the original offer so
was not binding. How could Array have made the clause binding?
Array would have needed to get a signed copy of the form it sent to Orkal confirming the order
and, by requiring signature or other sign that it specifically responded to the form sent by Array.
2. How do you know if a term that is changed is material or not?
That is a bit unclear in case law. Cases vary quite a bit in what is considered material so as to
require specific acceptance. Generally it would include a change in price, delivery terms,
Add, Case: Axelson v. McEvoy-Willis (5th Cir. 1993)—McEvoy hired Axelson to build special
equipment for it for oil rigs. Various quotes and details went back and forth for month before
McEvoy finally sent a purchase order form that stated it contained all the details of the contract
and gave McEvoy the right to cancel at any time. After Axelson shipped 28 pieced of equipment,
with 8 more ready, and planning to make 40 more as called for, McEvoy suddenly cancelled.
Axelson sued; damages of $684,905 were awarded. McEvoy appealed.
Decision: The parties had started working before McEvoy sent the contract it considered to be
the binding document. That does not square with the reality of the situation. The UCC instructs
Add. Case: Mace Ind. v. Paddock Pool Equip. (Ct. App., SC, 1986)--Mace sent a quote for
equipment to Paddock in the form of a sales agreement that included the terms on which Mace
proposed to sell the equipment. It stated that invoices must be paid within the time specified;
balances overdue 30 days were subject to additional charges; and Paddock would be responsible
for any costs in collecting past due debts. Paddock responded with a purchase order on its form
which said nothing about overdue bills. Mace accepted the order but struck out a statement on
the form that it was the entire agreement between the parties. When a dispute arose Paddock
claimed the purchase order was a counteroffer to purchase the equipment on the terms and
conditions contained in the purchase order, while Mace characterizes the purchase order as an
acceptance of its offer. The court held that there was a contract to which Paddock was bound; it
appealed.
Decision: Affirmed. UCC 2-207 says “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.” This
Contract Modification—The UCC provides that parties need not exchange new consideration
to modify an existing sales contract. Such a modification to a sales contract must meet the UCC’s
test of good faith dealing. 2-209(1)
Add. Case: Gateway v. Charlotte Theatres (1st Cir., 1961)--Gateway promised to install air
conditioning by May 1 in a movie theater it leased to Charlotte. Not until June 5 did Gateway
contract with Valley to install the AC, but Gateway inserted a clause in the bid from Valley that
the job was to be completed by June 22. Valley did not respond to that clause but proceeded with
the job, which was finished August 7. Charlotte sued Gateway for losses due to not having AC
from May 1 to August 7. Gateway asserted that Valley was liable for damages after June 22
because that was the finishing date Gateway put in the contract. Valley denied responsibility; it
did not recognize the June 22 date as valid.
Decision: Valley could not claim it did not know of the June 22 date; it was noted on the contract
when returned and stated in the cover letter with the contract. Under the UCC there was a valid
contract even though the change was made in the contract. There may have been silent assent to
Add. Case: Etheridge Oil v. Panciera (Dist. R.I., 1993)--Etheridge contracted to supply fuel to
Marbella (a truck stop). Under the contract “the principals of Marbella join in … to guaranty
performance and payment by Marbella.” Marbella defaulted so Etheridge sought payment from
the principals. They argued that modifications to the contract by Etheridge discharged their
obligations:
1. When environmental testing of the truck stop’s fuel lines and tanks was required, Etheridge put
more fuel in the tanks than specified in the contract. Etheridge allowed payment on terms more
lax from those in the contract (which required payment within 10 days of shipment).
2. As to other contract shipments, over time the payment due date was extended from 10 days
after delivery to 13 days after delivery.
3. Because of payment problems, Etheridge placed Marbella on a “cash on delivery” basis.
Etheridge asserted that the modifications were not in writing and were not supported by
consideration. Therefore they cannot serve as a basis to discharge the principals as guarantors,
who should be bound by the original contract.
Decision: The modifications were material, and, therefore, the principals were discharged from
their responsibilities as guarantors. The UCC provides “(a) signed agreement which excludes
modification ... except by a signed writing cannot be otherwise modified.” 2-209(2) However,
section (4) states that “although an attempt at modification ... does not satisfy the requirements
Statute of Frauds—Under Article 2 statute of frauds, the basic rule is that a contract for the sale
of goods priced at $500 or more is not enforceable unless it is in writing and signed by the party
against whom enforcement is sought. In comparison to the common law, Article 2 relaxes the
requirements for the sufficiency of a writing. 2-201
Failure to Respond to a Writing—In dealings between merchants, if one party sends a written
confirmation of a deal that has been discussed, and the other party does not respond, there is still
a good contract if it is clear the receiver knows of the writing and does not object within ten days
of receipt. 2-201(2)
Parol Evidence—Since the UCC is less strict about all terms being in a contract, oral testimony
is more likely to be admitted to clarify customary trade practices if the writing is not clear. 2-202
Add. Case: Leonard Pevar Co. v. Evans Products (D. Del., 1981)--Pevar called around for
price quotes on plywood. Evans gave the low quote and sent a standard order form with the
wood; terms were standard except that in boilerplate it disclaimed warranties. Pevar had
problems with the wood and sued for breach as Evans would do nothing. Parties moved for
summary judgment.
Decision: The parties reached an agreement on the phone, then Pevar sent a written order.
Evans ignored that and sent its own form with the order. So there is a battle of the forms. Evans’
Add. Case: Schmieding Produce v. Cagle (Sup. Ct., Al., 1988)--Cagle, a farmer, contracted to
buy seed potatoes from Schmieding. He paid part and was to pay the balance when the crop was
harvested. He failed to harvest and so could not pay; Schmieding sued. Cagle counterclaimed
that Schmieding breached a contract to buy Cagle’s crop, which is why he did not harvest. There
was no written agreement about buying the harvest, but Cagle testified that Schmieding
employees agreed to pay Cagle $5.50 per bag for white potatoes and to pay market price for red
potatoes at harvest time. The only written evidence was a letter from Schmieding that said,
“Your potato harvest season is just around the corner. We are looking forward to working with
you on the shipment of your crop. ... Please give us a week notice before you are ready to ship, in
order for us to prepare our sales orders. ... Give us a call if you have any questions.”
Schmieding denied there was any promise to buy Cagle’s crop.
Decision: “The UCC is to be ‘supplemented’ by the applicable principles of law and equity.”
(1-103) “This case is controlled by the UCC’s version of the parol evidence rule as set forth in ...
2-202. In regard to the interpretation of a written contract intended as a ‘final expression of
Filling the Gaps—Compared to the common law, contracts under the UCC are more likely to
have open or unclear terms inserted later and still be a valid contract. When the parties have had
regular dealings, the courts are to look to their previous behavior; the courts also look to trade
practice. 1-205
CASE: Griffith v. Clear Lakes Trout (Sup. Ct., ID 2007)—Griffith grew baby trout he got from
Clear Lakes and resold them to Clear Lakes when the reached “market size.” Price was set per
pound. Business went on for six years when Clear Lakes demanded Griffith grow the fish longer
to bigger size. Griffith was struggling already and could not make this change in operations and
survive. He sued Clear Lakes for breach. Clear Lakes claimed there was no contract because they
differed about what market size meant. The district court held for Griffith; Clear Lakes appealed.
Decision: Affirmed. Under the UCC the contract does not fail for indefiniteness when the parties
intended to contract and there is a basis for understanding what they intended. The parties
Questions: 1. The Idaho high court held that by their actions the parties understood the meaning
of “market size” so there was an agreement. How could Clear Lakes have avoided this problem?
A better specified contract would have helped. Clear Lakes did not foresee that market
2. Since market conditions changed, and customers began to want bigger fish, how could Clear
Lakes and Griffith have adjusted in a friendly manner?
The parties could have tried to work together better, but apparently, at the going price, Griffith
Price—When the price in a contract is unclear (such as to be agreed upon in the future), and a
problem arises, the courts look to what is “a reasonable price.” 2-305 The court look to fair
Quantity—The courts can determine quantities in a contract, looking to what was intended at the
Add. Case: Orange and Rockland Utilities v. Amerada Hess (App. Div., NY, 1977)--In 1969,
Hess agreed to supply Orange and Rockland (O&R) with “all of the fuel oil required for its
Lovett Generating Plant until September 30, 1974.” The contract included estimates of annual
requirements and set price at $2.14 per barrel. By May 1970 the price had risen 40%. O&R
increased its fuel oil requirements as it substituted oil for more costly natural gas and it sold
large amounts of electricity at low prices to other utilities. O&R’s demand was 63% over the
original estimate by June. Hess refused to meet the demands but increased supplies 10% above
the contract estimates. O&R bought more oil from other suppliers at higher prices. O&R’s
purchases more than doubled the estimates in the Hess contract and it sued Hess for the
difference between its costs of fuel oil and what those costs would have been if Hess had
supplied at $2.14. The trial court denied recovery, finding a lack of good faith by O&R. Hess
appealed.
Decision: Affirmed. The court found ample evidence to justify a finding of lack of good faith by
Issue Spotter: Gouge the Wholesaler
Yes, it is a violation of the contract. The expectation of requirement and output contracts is that
no one take unfair advantage of the other. You would violate that by reselling to other gas
stations, and you would violate it if you cut your retail price a couple pennies below the going
rate and had a steady stream of customers 24 hours a day. That was not your normal business
practice previously, so it is abusing the nice position you have found yourself in.
Delivery Terms—If a contract is not clear as to who is responsible for transportation of a
product, and at what point responsibility shifts, the courts look to the UCC, which says that
delivery will be in a “reasonable time.” 2-309 Unless otherwise specified, once a good is turned
over to a shipment from the seller’s place of business, the seller’s responsibility ends. If the
goods are in another location known to the parties when the contract was made, that location is
the place of delivery. 2-308 Various sections of the UCC detail delivery terms such as “free on
board.” 2-319–2-324
International Perspective: How to Assure Foreign Buyers of Product Quality
Smaller firms have difficulty establishing a reputation, especially in international markets. To
provide quality assurance, the Intl. Org. for Standardization (ISO) coordinates standards in many
areas of business. Its certification is evidence that a firm is capable of quality products in
particular areas.
Add. Case: In re Earle Industries (E.D., Pa., 1988)--CE ordered some custom-made equipment
from Earle for $17,800. Earle said it normally took ten weeks. November 18, CE placed the
order, telling Earle it needed the equipment in early January. Earle responded that the
equipment would be ready the end of January but that delivery was on a “best efforts” basis.
When the equipment was not ready the end of January, CE cancelled the order. Earle billed CE
for $4,000 to cover costs to date that could not be recovered. CE contended it owed nothing due
to breach of contract.
Decision: CE will pay $4,000. The contract did not set a firm delivery date of the end of
Add. Case: Baker v. DEC Corp. (Sup. Ct., Mich., 1998--Plaintiffs, dairy farmers, contracted to
buy a DEC milking machine. Equipment was delivered to local dealer at the end of July, was
installed at the farm on Sept. 8, and was tested and approved for operation by the Department of
Agriculture on Sept. 12. On Sept. 10, four years later, plaintiffs sued DEC for breach of
warranty, claiming the equipment was defective and injured their operation. DEC countered that
the four-year statute of limitation had expired before suit was filed. Trial court agreed with
DEC; court of appeals reversed; DEC appealed.
Decision: Reversed. Tender of delivery, for purposes of statute of limitations for breach of sales
contract did not occur until seller offered conforming goods. The manufacturer had no
Add. Case: Allsopp Sand & Gravel v. Lincoln Sand & Gravel (App.Ct., Ill., 1988)--In March,
“Allsopp agreed to supply and Lincoln agreed to purchase 50,000 tons of FA-1 specification
sand for $1.20 per ton. ... Lincoln agreed to pay the balance due under the contract by
December 31 ... and to take delivery of the remaining tonnage of sand by the spring....” Sand
was to be loaded during regular business hours; “loading out at other times was to be by
‘special arrangements.’” Lincoln took and paid for a quarter of the sand. In December, owing
$45,000 by the end of the month, Lincoln requested it get the rest of the sand. Allsopp said the pit
was closed and to reopen it before next spring the price would be raised 20 or 25 cents per ton;
Lincoln offered 5 cents more and to have its employees help with loading; Allsopp refused and
sued for payment.
Decision: “The dispositive issue on review is whether Allsopp’s refusal to make special
arrangements to load out sand in December at the original contract price was commercially
reasonable.” “First, we must determine whether a price increase is inherent in the term special
arrangements. A contract for goods will not be held invalid for indefiniteness just because
