Belden Inc. v. American Electronic Components, Inc.
885 N.E.2d 751 (2008)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under UCC § 2-207(3), when merchants' writings do not form a contract because an acceptance is expressly conditional on assent to new terms, but the parties' conduct recognizes a contract's existence, the contract's terms consist only of those on which the writings agree, supplemented by UCC gap-fillers, thereby excluding the unassented-to conditional terms. A seller's prior affirmations of fact regarding a product's composition, coupled with a consistent course of dealing, can create a binding express warranty for subsequent transactions.
Facts:
- Since 1989, American Electronic Components, Inc. (AEC), a manufacturer of automobile sensors, regularly purchased wire from Belden, Inc. (Belden).
- In 1996 and 1997, to comply with AEC's quality control program, Belden provided assurances that it would use insulation from a specific supplier, Quantum Chemical Corp. (Quantum), in its wire.
- Beginning in 1998, AEC sent its purchase orders to Belden via fax, which omitted the terms and conditions printed on the back of its original forms.
- In June 2003, Belden, without notifying AEC, began using insulation from a new supplier, Dow Chemical Company (Dow), which had different physical properties than the Quantum insulation.
- On October 17, 2003, AEC faxed a purchase order to Belden. Belden responded with an order acknowledgment containing a boilerplate clause on the back that limited its liability for consequential damages and stated acceptance was expressly conditional upon the buyer's assent to its terms.
- AEC never expressly assented to Belden's terms. Belden then shipped, and AEC accepted, the wire manufactured with the new Dow insulation.
- AEC used the wire in sensors installed in approximately 18,000 Chrysler vehicles, but the Dow insulation cracked, leading to a massive recall.
- Pursuant to an agreement, AEC was required to reimburse Chrysler for the expenses associated with the vehicle recall.
Procedural Posture:
- AEC filed a complaint against Belden in the trial court, seeking consequential damages.
- AEC filed a motion for partial summary judgment on the issues of duty and limitation of remedy.
- Belden filed a cross-motion for summary judgment on the same issues.
- The trial court granted AEC's motion for partial summary judgment and denied Belden's cross-motion.
- Belden, as the appellant, appealed the trial court's order to the Court of Appeals of Indiana.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Under UCC § 2-207, does a seller's limitation of damages clause become part of a contract when it is in an order acknowledgment made expressly conditional on the buyer's assent, which is never given, and do the seller's prior representations and course of dealing create an express warranty for future transactions?
Opinions:
Majority - Barnes, J.
No, Belden's limitation on damages clause is not part of the contract. Under UCC § 2-207(1), no contract was formed by the exchange of documents because Belden's acknowledgment was expressly conditional on AEC's assent to its new terms, and AEC never gave that assent. However, the parties' conduct—shipping and accepting the goods—was sufficient to establish a contract under UCC § 2-207(3). The terms of a contract formed by conduct consist of the terms on which the writings agree, supplemented by standard UCC 'gap-filler' provisions. Belden's liability limitation was not an agreed-upon term, so it is 'knocked out' and does not become part of the contract. The court rejected Belden's argument that its repeated sending of the form established a 'course of dealing' that incorporated the term, reasoning that this would revive the common law 'last-shot' rule that the UCC was designed to prevent. Yes, Belden's prior representations and course of dealing created an express warranty. Belden’s 1996 and 1997 written assurances that it used Quantum insulation, made to become a certified supplier for AEC, were affirmations of fact that became part of the basis of the bargain. This, combined with the subsequent multi-year course of dealing where Belden consistently supplied wire with Quantum insulation, created a 'common basis of understanding' that this quality standard would be maintained. Therefore, Belden created an express warranty that the wire would conform to those original specifications, which extended to the October 2003 transaction.
Analysis:
This case provides a clear application of the UCC § 2-207 'battle of the forms' analysis, particularly the function of subsection (3). It solidifies the 'knock-out' rule in situations where writings don't form a contract but conduct does, preventing the party who sent the last form (the 'last shot') from imposing its unagreed-to terms. The decision emphasizes that a party cannot unilaterally add material terms like liability limitations through boilerplate language on a conditional acceptance form. Furthermore, the analysis of the express warranty demonstrates how a long-term course of performance and foundational quality promises can create binding obligations that persist across numerous individual transactions without being restated each time.
Unlock the full brief for Belden Inc. v. American Electronic Components, Inc.