Richardson v. Union Carbide Industrial Gases, Inc.
790 A.2d 962 (2002)
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Rule of Law:
Under the Uniform Commercial Code as adopted in New Jersey, when commercial writings between a buyer and seller contain directly conflicting terms, those terms are "knocked out" of the contract. The resulting contract consists of the terms on which the writings agree, supplemented by any applicable UCC gap-filler provisions.
Facts:
- In 1988, Hoeganaes Corporation undertook a project to convert one of its furnaces and required a new powder transporter system.
- Rage Engineering, Inc. submitted proposals to Hoeganaes to sell the needed equipment.
- Rage's proposals included pre-printed terms and conditions stating that any purchase order was subject to its terms, including a clause requiring the purchaser (Hoeganaes) to indemnify Rage.
- In response, Hoeganaes issued purchase orders to Rage to buy the equipment.
- The back of Hoeganaes's purchase orders contained its own terms and conditions, including a conflicting clause requiring the seller (Rage) to indemnify Hoeganaes.
- Neither party specifically objected to the other's indemnity clause, and both proceeded with the transaction as if a contract had been formed.
- Rage delivered the equipment, and Hoeganaes paid for and installed it.
- In 1992, a Hoeganaes employee, Jeffrey Richardson, was injured in an explosion involving the furnace where the equipment was installed.
Procedural Posture:
- Jeffrey Richardson sued multiple defendants, including Rage Engineering, Inc. and his employer Hoeganaes Corporation, in a New Jersey trial court for injuries sustained in a workplace accident.
- In its answer, Rage filed a cross-claim against Hoeganaes seeking contractual indemnification based on the terms included in its sales proposal.
- Rage filed a motion for summary judgment to enforce the indemnification clause, and Hoeganaes cross-moved for summary judgment to dismiss Rage's claim.
- The trial court judge granted summary judgment in favor of Hoeganaes, dismissing Rage's cross-claim for indemnification.
- Rage, as appellant, appealed the dismissal to the Superior Court of New Jersey, Appellate Division, with Hoeganaes as the respondent.
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Issue:
When commercial forms exchanged between a buyer and a seller contain directly conflicting indemnity clauses, do the conflicting clauses become part of the contract under New Jersey's Uniform Commercial Code, N.J.S.A. 12A:2-207?
Opinions:
Majority - Braithwaite, J.A.D.
No. When commercial forms contain directly conflicting indemnity clauses, those clauses do not become part of the contract. Adopting the majority 'knock-out' rule, the court holds that conflicting terms in an offer and acceptance cancel each other out and do not become part of the final agreement. The purpose of UCC § 2-207 is to displace the common law's arbitrary 'last-shot' rule, which favored the party who sent the last form. Under the 'knock-out' rule, the contract consists only of the terms on which the parties' writings agree, along with any supplementary terms provided by the UCC. Because the indemnity clauses in Rage's proposal and Hoeganaes's purchase order were in direct conflict, they are both knocked out of the contract, leaving Rage without a basis for its contractual indemnification claim.
Analysis:
This decision officially adopts the 'knock-out' rule in New Jersey for resolving the 'battle of the forms' under UCC § 2-207, aligning the state with the majority of U.S. jurisdictions. By rejecting the 'first-shot' or 'last-shot' doctrines, the ruling prevents the arbitrary outcome where one party's boilerplate terms prevail simply due to the timing of their forms. This provides greater certainty in commercial transactions, emphasizing that material, non-negotiated terms in conflicting forms will be nullified. Consequently, parties who wish to ensure the inclusion of critical terms like indemnification must secure express agreement rather than relying on their standard forms.
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