Reilly Foam Corp. v. Rubbermaid Corp.
48 U.C.C. Rep. Serv. 2d (West) 81, 2002 U.S. Dist. LEXIS 9273, 206 F. Supp. 2d 643 (2002)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under Pennsylvania's Uniform Commercial Code (UCC) § 2-207, when an offer and an acceptance contain different, conflicting terms, the conflicting terms are 'knocked out' of the contract, which then consists of the terms on which the writings agree, supplemented by UCC gap-filler provisions.
Facts:
- Rubbermaid Corporation needed special sponges for its 'Tidal Wave Project' mops intended for sale at Target stores.
- When its usual supplier, Tek Pak, could not make timely deliveries, Rubbermaid contacted Reilly Foam Corporation on March 4, 1999.
- On March 26, 1999, Reilly Foam sent a letter and detailed quotation to Rubbermaid, proposing to be the exclusive supplier for all Butterfly and Roller Mop sponges and setting minimum annual purchase quantities for other sponges.
- The proposal required Rubbermaid to purchase two million pieces of 'Other Affected Products' over two years, with a surcharge to amortize tooling costs.
- On March 30, 1999, Rubbermaid's manager, Tony Ferrante, responded with a letter and the signed price list marked 'Approved'.
- Ferrante's letter limited Rubbermaid's commitment, stating that only sponge mop products assembled by a third party, New Knight, Inc., would source sponges from Reilly Foam.
- After the exchange, Rubbermaid continued to purchase some sponges for the Tidal Wave line directly from Tek Pak.
- Rubbermaid did not meet the annual minimum purchase quantities for 'Other Affected Products' and did not purchase two million pieces within the two-year period specified in Reilly Foam's proposal.
Procedural Posture:
- Reilly Foam Corporation sued Rubbermaid Corporation in the U.S. District Court for the Eastern District of Pennsylvania, alleging breach of contract and other claims.
- Reilly Foam filed a motion for partial summary judgment, arguing Rubbermaid's liability was clear as a matter of law.
- Rubbermaid filed a cross-motion for summary judgment on all of Reilly Foam's claims.
- Rubbermaid also filed a motion for sanctions against Reilly Foam for the untimely production of a supplemental expert report.
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 Pennsylvania's Uniform Commercial Code, do different, conflicting terms in an offer and acceptance become part of the contract, or are they 'knocked out' and replaced by UCC gap-fillers?
Opinions:
Majority - Schiller, District Judge.
No, different, conflicting terms are 'knocked out' of the contract. When merchants exchange forms with conflicting terms, those terms cancel each other out, and the resulting contract consists of the terms on which the forms agree, supplemented by default provisions from the Uniform Commercial Code. The court predicted that the Pennsylvania Supreme Court would adopt this 'knockout rule,' which is the majority approach, because it is more equitable than allowing the offeror's terms to automatically prevail and better reflects the reality of commercial transactions where parties proceed despite disagreements on boilerplate terms. The court first found that Reilly Foam's detailed March 26 letter was an offer, not merely a price quote, and Rubbermaid's March 30 response was an acceptance under UCC § 2-207, forming a contract despite the differing terms. Applying the knockout rule, the court found that Reilly Foam's proposal for a broad requirements contract conflicted with Rubbermaid's more limited acceptance tied to the assembler New Knight. Therefore, both conflicting exclusivity terms were knocked out. However, terms in the offer that were not contradicted by the acceptance, such as the minimum purchase quantities for 'Other Affected Products' and the two-year timeframe for the tooling surcharge, became part of the contract.
Analysis:
This case provides a clear application and endorsement of the 'knockout rule' for resolving 'battle of the forms' disputes under UCC § 2-207 in Pennsylvania. By adopting the majority approach, the decision provides predictability for commercial actors, clarifying that neither party can unilaterally impose its terms simply by being the first or last to send a form. The ruling emphasizes that when material terms conflict, courts will not favor one party's form over the other's but will instead construct a contract from the areas of agreement and UCC defaults. This serves as a significant precedent, advising businesses to explicitly negotiate and agree upon critical terms rather than relying on boilerplate, lest those terms be 'knocked out' in a dispute.
