Rocheux Int'l of N.J. v. U.S. Merchants Fin. Group
741 F.Supp.2d 651 (2010)
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Rule of Law:
Under UCC § 2-207, additional terms for commercially common practices like interest on overdue invoices and attorneys' fees included in a seller's written confirmation do not materially alter a contract between merchants if they do not result in unreasonable surprise or hardship. Once a contract is formed by a written confirmation, subsequent writings like invoices cannot add new or different terms under § 2-207.
Facts:
- Starting around 2000, U.S. Merchants Financial Group, Inc. and its related entities ('Defendants') began purchasing raw plastic materials from Rocheux International of New Jersey, Inc. ('Rocheux').
- Defendants' CEO, Jeffrie Green, allegedly had an initial verbal understanding with a Rocheux salesman that Defendants would not accept any additional terms or conditions from vendors.
- Between 2005 and 2006, Defendants placed several large purchase orders for plastic from Rocheux.
- For each order, Rocheux sent an Order Acknowledgment which it claims included a second 'Terms and Conditions' page containing clauses for a 1.5% monthly interest charge on overdue accounts and 25% attorneys' fees for collection actions.
- Defendants deny ever receiving the 'Terms and Conditions' pages attached to the Order Acknowledgments.
- Following shipments of goods between January and June 2006, Rocheux sent invoices that included footnotes stating terms for 1.5% monthly interest and 'reasonable attorney's fees'.
- Defendants failed to pay for the 2006 deliveries, resulting in an outstanding balance of over $2.1 million.
- Defendants later claimed that a substantial portion of the plastic delivered was defective and unusable, and they sold most of it as scrap without giving Rocheux an opportunity to inspect it.
Procedural Posture:
- Plaintiff Rocheux filed a six-count complaint against Defendants in the U.S. District Court for the District of New Jersey for breach of contract, claims on book accounts, unjust enrichment, and conversion.
- Defendants filed an Answer denying the allegations and asserting affirmative defenses, including breach of contract and breach of express and implied warranties.
- Plaintiff Rocheux moved for summary judgment on its claims for the 2006 deliveries and warehouse goods.
- Defendants filed a cross-motion for summary judgment and to redesignate certain affirmative defenses as counterclaims.
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Issue:
Under UCC § 2-207, do a seller's additional terms for interest and attorneys' fees, included in order acknowledgments sent to a buyer, materially alter the contract between merchants and thus fail to become part of the agreement?
Opinions:
Majority - Chief Judge Brown
No, the additional terms for interest and attorneys' fees do not materially alter the contract between the merchants. A term materially alters an agreement under UCC § 2-207(2)(b) if it would result in 'surprise or hardship if incorporated without express awareness by the other party.' Here, there was no unreasonable surprise because Rocheux repeatedly sent hundreds of standard forms containing these terms over a multi-year course of dealing, making it commercially reasonable to assume Defendants were aware of them. Furthermore, the terms do not impose an unreasonable hardship, as an 18% annual interest rate is common in commercial practice, and the 25% attorneys' fees provision, while high, is not unreasonable per se in the context of protracted litigation to collect a multi-million dollar debt. However, because a genuine dispute of fact exists as to whether Defendants actually received the 'Terms and Conditions' pages with the initial Order Acknowledgments, summary judgment on this issue is denied. The court also held that the invoices, sent after the Order Acknowledgments had already formed the contract, could not introduce new terms under § 2-207.
Analysis:
This decision offers a detailed analysis of the 'material alteration' clause of UCC § 2-207, reinforcing that terms reflecting common commercial practices, like interest and collection fees, are unlikely to be excluded on grounds of surprise or hardship, especially with a history of prior dealings. The opinion makes a critical distinction regarding the timing of documents, establishing that once an initial written confirmation (like an order acknowledgment) forms a contract, § 2-207 does not apply to subsequent documents like invoices. This clarifies that any later modifications must be analyzed under UCC § 2-208 (course of performance) or § 2-209 (modification), providing a clear boundary for 'battle of the forms' disputes. The case serves as a strong reminder for commercial parties to carefully review all standard forms, as a long course of dealing can impute knowledge of terms, even if they are not explicitly negotiated.
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