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Court of Appeals rules that additional terms in paint supplier's invoices that materially alter the parties' agreement do not form a part of contract with purchaser

By Brett Hill

In Tacoma Fixture Co. v. Rudd Co., the issue was whether additional terms in an invoice provided by a supplier of goods became a part of the parties' agreement under the Uniform Commercial Code ("UCC").  Tacoma Fixture regularly ordered paint and varnish products from Rudd Company ("Rudd") for its cabinet manufacturing business.  Rudd shipped the products to Tacoma Fixture and separately mailed an invoice, which included several terms that Tacoma Fixture did not specifically agree to, including a warranty disclaimer, the remedy limitation clause, a form selection clause, and an attorney fee clause.  Tacoma Fixture experienced problems with Rudd's products and sued for breach of the express and implied warranties.  Rudd moved for summary judgment based on the terms of the invoice and a form selection clause.  The trial court denied Rudd's motion holding that the invoice terms were not a part of the parties' contract, and the Division II Court of Appeals affirmed.

One of the more significant facts in the case was that Rudd conceded that the contract was formed between Rudd and Tacoma Fixture when Tacoma Fixture would make telephone calls to Rudd to order products and Rudd would agree to deliver the products.  Because of this concession, the Court analyzed whether the terms contained in Rudd's invoices were additional terms, rather than original terms of the parties' contract.

The Court analyzed the issue in the case under RCW 62A.2-207, which addresses when additional terms become a part of the parties' agreement under the UCC.  That section provides as follows:

(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)       Additional terms are to be construed as proposals for addition of a contract. Between merchants such terms become a 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 provision of this Title.

The Court found that part 1 did not apply because:  first, the terms on the invoice were additional terms construed as proposals that Rudd conceded were not accepted by Tacoma Fixture; and (2) acceptance by Rudd was not made expressly conditional on Tacoma Fixture's acceptance of the additional terms.

The Court held that part 2 of the statute did not apply because it was a contract between merchants and the additional terms (warranty disclaimer, remedy limitation, and form selection clause) materially altered the contract.

Therefore, the Court held that part 3 of the statute applied and that the terms of the parties' agreement were governed by their oral agreement and the supplemental terms provided by the UCC.  The additional terms that Rudd relied on as a basis for its summary judgment motion did not form a part of the parties' agreement, and the Court of Appeals affirmed the trial court's denial of Rudd's motion for summary judgment.

Full post as published by Construction Law Blog on February 28, 2008 (boomark / email).