Babcock & Wilcox Co. v. Hitachi America, Ltd.
406 F.Supp.2d 819 (2005)
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Rule of Law:
Under the Uniform Commercial Code (UCC), a price quotation is typically considered an invitation for an offer rather than a binding offer itself. To determine if a price quotation constitutes an offer, courts examine the totality of the circumstances, including the document's language and the parties' subsequent conduct, to ascertain the sender's intent.
Facts:
- Babcock & Wilcox Company (B&W) was designing an emissions reduction system for a power plant and needed a specialized catalyst component.
- In June 1999, B&W issued a Request for Quotation to Hitachi America, Ltd. (Hitachi) for the design and supply of the catalyst.
- On December 9, 1999, after several rounds of communication, Hitachi sent B&W a detailed proposal consisting of a 'Price Quotation' and technical specifications.
- This proposal included price, delivery, and payment terms, but also used conditional language such as 'we would like to substitute' for warranty clauses and invited further questions.
- On December 23, 1999, B&W sent a 'Letter of Intent' which identified certain terms as agreed upon and others, including 'Terms & Conditions,' as 'open issues' requiring further negotiation; Hitachi signed and returned this letter.
- The parties continued to negotiate material terms, including the price of the catalyst, for the next six months.
- On June 15, 2000, B&W issued a comprehensive Purchase Order that explicitly identified itself as an 'offer' and set forth its own terms and conditions.
- After receiving the Purchase Order, Hitachi shipped the catalyst to B&W without signing an acknowledgment form or objecting to the terms.
Procedural Posture:
- Babcock & Wilcox Company ('B&W') filed a complaint against Hitachi America, Ltd. ('Hitachi') in the U.S. District Court, a federal trial court.
- The complaint asserted claims for breach of contract, breach of express warranty, breach of implied warranty, and breach of the obligation of good faith and fair dealing.
- Hitachi filed a partial motion for summary judgment, asking the court to determine the controlling terms of the contract between the parties.
- B&W filed a response and a cross-motion for partial summary judgment, also asking the court to resolve which documents and terms constituted the final contract.
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Issue:
Does a detailed price quotation constitute a binding offer when the language of the quote suggests further negotiation and the parties continue to negotiate material terms for six months afterward?
Opinions:
Majority - Gwin, District Judge
No, the price quotation did not constitute a binding offer because the totality of the circumstances indicated it was part of an ongoing negotiation, not a final offer ready for acceptance. A price quotation is generally treated as an invitation for an offer, and the court must look at the parties' intent as demonstrated by all surrounding facts. Here, Hitachi's December 9, 1999 proposal, though detailed, used invitational language (e.g., 'price quotation,' 'we would like to add,' 'if you have any questions'). More importantly, the parties' subsequent conduct, including six months of further negotiations on material terms like price and the joint execution of a 'Letter of Intent' acknowledging 'open issues,' demonstrated that neither party considered the quotation a final offer. The court found that B&W's June 15, 2000 Purchase Order was the true offer, which Hitachi accepted by its performance in shipping the goods.
Analysis:
This decision reinforces the principle that under the UCC, contract formation is determined by the objective intent of the parties as revealed by their actions and communications, not by the labels on their documents. It highlights that a 'battle of the forms' analysis under UCC § 2-207 is only triggered if an actual offer and acceptance exist; preliminary negotiations, even if detailed, do not suffice. The ruling serves as a caution that continued negotiation over material terms after a price quote is issued is strong evidence that the quote was not a binding offer. Consequently, the party sending the last comprehensive document before performance (the 'last shot'), in this case B&W's Purchase Order, is likely to have its terms govern the contract.
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