C9 Ventures v. SVC-West, L.P.
202 Cal. App. 4th 1483, 12 Cal. Daily Op. Serv. 1200, 76 U.C.C. Rep. Serv. 2d (West) 699 (2012)
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Rule of Law:
In a personal property lease governed by California Uniform Commercial Code Division 10, an indemnification provision included in a later, unsigned invoice does not become part of the oral contract without the lessee's express assent. UCC Section 2207, which allows additional terms in sales contracts, does not apply to leases, and even if it did, an indemnification clause is a material alteration requiring express agreement.
Facts:
- SVC, a time-share business, regularly obtained event supplies, including helium-filled tanks and balloons, from C9 since November 2006.
- SVC typically placed orders by telephone, and C9 would deliver supplies with a standard form invoice, often requesting an SVC employee signature.
- The C9 invoice included an indemnification provision on the reverse side requiring SVC to indemnify C9 for losses arising from the use or possession of rented items.
- Prior to July 3, 2007, C9 presented the same or similar invoice to SVC 10 times, with SVC employees signing 6 of those times, but never objecting to the indemnification language.
- On July 3, 2007, SVC employee Veronica Pasco telephoned C9 with a rush order for eight helium-filled tanks, which C9 accepted.
- Later that day, C9 employee Ernesto Roque delivered the tanks to the Crowne Plaza Resort, but no SVC employee, including Zayra Renteria, signed the invoice because of a chaotic environment after an accident.
- While Roque was delivering tanks, a young boy attending a time-share presentation hugged one of the 130-pound, five-foot-tall helium tanks, causing it to fall on his hand and injure him.
- SVC employee Angela Pringle later submitted invoice No. 493 for payment, which was approved by an SVC manager, and SVC paid the $520 invoice on August 23, 2007, without discussion of the reverse-side terms.
Procedural Posture:
- In January 2008, the injured boy and his parents sued SVC and C9 for injuries resulting from the accident.
- SVC and C9 each paid $350,000 to settle the boy's lawsuit.
- C9 filed a cross-complaint for express indemnity against SVC in state trial court, claiming the indemnification provision on the back of the July 3 invoice bound SVC to indemnify it for the sum paid and for attorney fees, asserting California Uniform Commercial Code Section 2207 was applicable.
- SVC argued the terms of the invoice were not binding because it was never signed.
- The trial court granted judgment in favor of C9, finding that under UCC Section 2207, the indemnification provision did not materially alter the contract and therefore became an added term, and subsequently awarded C9 $23,955 in attorney fees.
- SVC timely appealed from the judgment.
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Issue:
Is an indemnification provision on an unsigned invoice enforceable against a party to an oral personal property lease agreement when the invoice was delivered after the agreement and the party paid the invoice?
Opinions:
Majority - Fybel, J.
No, the indemnification provision on the back of the unsigned invoice is not binding on SVC. The court determined that the oral contract between SVC and C9 for helium tanks was a lease of personal property, not a sale of goods. Therefore, it is governed by Division 10 of the California Uniform Commercial Code, not Division 2, which contains Section 2207. Division 10 lacks a provision analogous to Section 2207, meaning additional terms in a later-sent invoice require express assent. The court found no express assent by SVC, noting that prior instances of signing invoices (6 out of 10) did not establish a 'course of dealing' for unsigned invoices to be binding, nor did payment of the invoice constitute assent to additional terms as it merely performed the existing oral contract. Furthermore, the court addressed the trial court's erroneous application of Section 2207. Even if Division 2 applied, an indemnification provision would be considered a 'material alteration' to the contract as a matter of law, and thus would not become part of the contract between merchants without express agreement, as it would cause 'surprise or hardship' and shifts significant economic burdens. The court reversed the trial court's judgment for C9, including the attorney fees award.
Analysis:
This case is significant for clarifying the distinct applicability of California Uniform Commercial Code Divisions 2 (Sales) and 10 (Leases), emphasizing that Section 2207's 'battle of the forms' rule does not extend to personal property leases. It reinforces that in lease agreements, express assent is generally required for additional terms in post-formation documents like unsigned invoices. The ruling also solidifies the principle that an indemnification clause constitutes a 'material alteration' as a matter of law, making it exceptionally difficult to incorporate into a contract without explicit agreement, even in UCC Article 2 transactions. This provides clear guidance on contract formation and modification, particularly for boilerplate terms in ongoing business relationships.
