Diamond Fruit Growers, Inc. v. Krack Corp.
794 F.2d 1440 (1986)
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Rule of Law:
Under UCC § 2-207, if an acceptance is expressly made conditional on the offeror's assent to additional or different terms, the offeror's assent must be specific and unequivocal. Merely continuing to perform under the contract does not constitute assent to the additional or different terms.
Facts:
- Krack Corporation, a cooling unit manufacturer, purchased steel tubing from Metal-Matic, Inc. for approximately ten years.
- The parties' course of dealing involved Krack sending release purchase orders, to which Metal-Matic would respond with an acknowledgment form before shipping the tubing.
- Metal-Matic's acknowledgment form disclaimed liability for consequential damages and limited its liability to repair, replacement, or refund.
- The form also stated that Metal-Matic's acceptance was 'expressly made conditional to purchaser’s acceptance of the terms and provisions of the acknowledgment form.'
- At one point, Krack's purchasing manager, Allen Zver, told Metal-Matic's Executive Vice President, Robert Van Krevelen, that Krack objected to the disclaimer terms.
- Van Krevelen refused to change the terms.
- After this discussion, Krack continued to order, accept, and pay for tubing from Metal-Matic.
- Krack sold a cooling unit containing Metal-Matic's tubing to Diamond Fruit Growers, Inc., which later failed and leaked ammonia, causing damage to Diamond's fruit.
Procedural Posture:
- Diamond Fruit Growers, Inc. sued Krack Corporation in federal district court to recover losses from damaged fruit.
- Krack filed a third-party complaint against its tubing suppliers, Metal-Matic, Inc. and Van Huffel Tube Corporation, seeking contribution or indemnity.
- At the close of evidence at trial, the court granted a directed verdict in favor of Van Huffel.
- The trial court denied Metal-Matic's motion for a directed verdict.
- The jury returned a verdict for Diamond against Krack, and found that Krack was entitled to 30% contribution from Metal-Matic.
- The trial court denied Metal-Matic's subsequent motion for judgment notwithstanding the verdict (judgment n.o.v.).
- Metal-Matic, as appellant, appealed the judgment to the U.S. Court of Appeals for the Ninth Circuit, with Krack as the appellee.
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Issue:
Does a buyer's conduct of continuing to purchase and pay for goods, after objecting to a seller's liability disclaimer that was part of an acceptance expressly conditioned on assent to its terms, constitute assent to those terms under UCC § 2-207(1)?
Opinions:
Majority - Wiggins
No. A buyer's conduct of continuing a commercial relationship does not constitute a specific and unequivocal expression of assent to a seller's conditional terms under UCC § 2-207. Because Krack objected to Metal-Matic's disclaimer and never expressly assented to it, the term did not become part of the contract. The court reasoned that UCC § 2-207 was designed to abolish the common law's 'last shot' rule, where the party who sent the last form controlled the terms. To hold that performance equals assent would reinstate that rule, giving an unfair advantage to the seller. Instead, where acceptance is expressly conditional on assent to new terms and no such assent is given, but the parties' conduct recognizes a contract, UCC § 2-207(3) applies. Under § 2-207(3), the contract consists of the terms on which the parties' writings agree, supplemented by the UCC's default provisions (the 'knock-out' rule). In this case, the conflicting terms regarding liability are knocked out, and the UCC's default rules, which permit consequential damages, apply.
Analysis:
This case significantly clarifies the meaning of 'assent' within the UCC § 2-207(1) proviso, establishing a high standard that requires more than mere performance. By rejecting the argument that continuing to do business constitutes assent, the court reinforces the UCC's departure from the common law 'last shot' rule. The decision places the burden on the party conditioning acceptance (typically the seller) to obtain explicit, unequivocal assent to its terms before performance. If a seller proceeds to ship goods without this assent, it risks being bound not by its own liability-limiting terms, but by the UCC's default, more buyer-friendly gap-filler provisions.
