Interstate Industries, Inc. v. Barclay Industries, Inc.

United States Court of Appeals, Seventh Circuit
540 F.2d 868 (1976)

ELI5:

Rule of Law:

A price quotation that omits key terms such as quantity, delivery, and payment, and does not express an intent to be bound, is generally considered an invitation to make an offer, not an offer itself. For a court to assert personal jurisdiction under a long-arm statute based on a contract to supply goods within the state, the existence of an enforceable contract must first be established.

Facts:

Barclay Industries, Inc. (Barclay) is a Delaware corporation with its principal place of business and manufacturing plant in Lodi, New Jersey.
Barclay has no property, offices, employees, or agents in Indiana and is not admitted to do business there.
On August 23, 1973, Barclay sent a letter from its New Jersey office to Interstate Industries, Inc. (Interstate) in Indiana, advising it could manufacture certain fiberglass panels.
The letter was explicitly titled a 'price quotation' and included prices based on order size, but did not specify quantity, delivery time, or payment terms.
In November 1973, Interstate mailed two purchase orders for the panels to Barclay's New Jersey office.
On January 16, 1974, Barclay sent a letter from New Jersey informing Interstate that it would be unable to provide the panels requested in the purchase orders.

Procedural Posture:

Interstate Industries, Inc. filed a breach of contract lawsuit against Barclay Industries, Inc. in the U.S. District Court for the Northern District of Indiana (a court of first instance).
Barclay filed a motion to dismiss the complaint for lack of personal jurisdiction.
The district court denied Barclay's motion to dismiss.
Barclay then filed a motion for reconsideration or, in the alternative, for permission to file an interlocutory appeal.
The district court denied the motion for reconsideration but granted permission for an interlocutory appeal, which Barclay (as appellant) took against Interstate (as appellee) to the U.S. Court of Appeals for the Seventh Circuit.

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Issue:

Does a company's letter sent to a potential buyer, which refers to itself as a 'price quotation' and omits essential terms like quantity and delivery time, constitute a formal offer sufficient to form a contract for the purpose of establishing personal jurisdiction under a state's long-arm statute?

Opinions:

Majority - Sprecher, Circuit Judge

No. A company's letter that is merely a price quotation lacking essential terms is not a formal offer, but an invitation to negotiate, and thus cannot form the basis of a contract for jurisdictional purposes. For an Indiana court to have personal jurisdiction under its long-arm statute, which covers contracts to supply goods in the state, a valid contract must exist. Barclay's letter was not an offer because it was explicitly labeled a 'price quotation,' contained no language indicating a present intention to be bound, and failed to specify essential terms like quantity, delivery time, or payment conditions. Citing established contract law principles and the Restatement of Contracts, the court determined that such communications are preliminary negotiations. Therefore, Interstate's purchase orders constituted the offers, which Barclay was free to reject. As no contract was formed, the statutory basis for personal jurisdiction over Barclay was absent.

Analysis:

This decision reinforces the traditional contract law distinction between an offer and an invitation to make an offer (or invitation to treat). It clarifies that for a court to exercise personal jurisdiction under a contract-based provision of a long-arm statute, the plaintiff must first demonstrate the actual existence of an enforceable contract. The ruling establishes that merely sending price quotes into a state, without more definite terms expressing an intent to be bound, is insufficient to subject an out-of-state seller to that state's jurisdiction. This protects sellers from being haled into court in any forum where they have merely sent preliminary pricing information.

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