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Brown Machine, Inc. v. Hercules, Inc.

Missouri Court of Appeals, Eastern District
770 S.W.2d 416 (1989)
ELI5:

Rule of Law:

Under U.C.C. § 2-207(2)(a), additional terms in an acceptance, such as an indemnification clause, do not become part of a contract between merchants if the offer expressly limits acceptance to the terms of the offer, unless the offeror expressly assents to the additional terms.


Facts:

  • In November 1975, Brown Machine submitted a proposal to Hercules Inc. for a T-100 trim press, which included a boilerplate indemnification clause requiring Hercules to cover any liability Brown incurred from the machine's use.
  • Brown Machine's proposal stated it would expire in thirty days and that no order would be binding until accepted on Brown's standard 'Order Acknowledgement' form.
  • After the thirty-day period expired, in January 1976, Hercules sent a written purchase order to Brown Machine for the trim press.
  • Hercules's purchase order form explicitly stated: 'THIS ORDER EXPRESSLY LIMITS ACCEPTANCE TO THE TERMS STATED HEREIN... ANY ADDITIONAL OR DIFFERENT TERMS PROPOSED BY THE SELLER ARE REJECTED UNLESS EXPRESSLY AGREED TO IN WRITING.' The order did not contain an indemnity provision.
  • In February 1976, Brown Machine sent Hercules its own 'ORDER ACKNOWLEDGEMENT' form, which restated the technical specifications and again included the indemnification clause in its 'TERMS AND CONDITIONS OF SALE.'
  • Hercules responded to the acknowledgment with a letter correcting a technical detail ('Provision 6.1 of your order acknowledgement... should read ‘Reverse Trim’...'), and stated, 'All other specifications are correct.'
  • Brown Machine manufactured and delivered the trim press, and Hercules paid the purchase price.
  • Subsequently, a Hercules employee, James Miller, was injured while operating the trim press.

Procedural Posture:

  • James Miller, an employee of Hercules, and his wife sued Brown Machine for injuries Miller sustained while operating the trim press.
  • Brown Machine settled the lawsuit with the Millers.
  • Brown Machine filed an action for indemnification against Hercules in the trial court.
  • Following a trial, a jury returned a verdict in favor of Brown Machine.
  • The trial court entered a judgment awarding Brown Machine $157,911.55 plus interest.
  • Hercules Inc., as appellant, appealed the trial court's judgment to the Missouri Court of Appeals.

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Issue:

Does an indemnification clause contained in a seller's order acknowledgment become part of a sales contract when the buyer's purchase order expressly limits acceptance to its own terms and the buyer does not subsequently give express assent to the additional clause?


Opinions:

Majority - Stephan, J.

No. An indemnification clause in a seller's acknowledgment does not become part of the contract when the buyer's offer expressly limits acceptance to its terms and the buyer does not expressly assent to the new term. The court determined that Hercules's purchase order was the offer, not Brown Machine's initial price quote, which was merely an invitation to negotiate that had also expired. Brown Machine's order acknowledgment acted as an acceptance under U.C.C. § 2-207(1), not a counteroffer, because it was not 'expressly made conditional' on Hercules's assent to the new terms. Therefore, U.C.C. § 2-207(2) governed whether the additional terms became part of the contract. Under § 2-207(2)(a), the indemnity clause was excluded because Hercules's offer expressly limited acceptance to its own terms. Furthermore, the indemnity clause was a material alteration, which under U.C.C. § 2-207, requires express assent from the offeror. Hercules's letter correcting a machine 'specification' did not constitute express assent to the separate 'terms and conditions of sale,' as assent cannot be presumed from silence or failure to object.



Analysis:

This case provides a classic application of U.C.C. § 2-207, commonly known as the 'battle of the forms.' The court's decision reinforces the power of an offeror to control the terms of a contract by including language that expressly limits acceptance to the terms of the offer. It clarifies that a response with different terms is an acceptance, not a counteroffer, unless it explicitly states that the offeree is unwilling to proceed without assent to the new terms. This holding underscores that for a material alteration, like an indemnification clause, to be incorporated into the contract against an express limitation, the offeror's assent must be explicit and unambiguous, not inferred from conduct relating to other parts of the agreement, such as technical specifications.

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