Tubelite v. Risica & Sons, Inc.
16 U.C.C. Rep. Serv. 2d (West) 285, 819 S.W.2d 801, 35 Tex. Sup. Ct. J. 225 (1991)
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Rule of Law:
Under the Uniform Commercial Code, a buyer's mere failure to object to a seller's unilateral inclusion of an interest term on post-contract formation documents, such as invoices and statements, does not create an implied agreement to modify the contract to include that term, especially where the buyer never pays the interest charges.
Facts:
- Tubelite, a materials supplier, sent a price quotation to Risica & Sons, Inc., a subcontractor, for fabricated materials.
- The quotation expressly limited acceptance to its terms, objected to any different terms, and did not contain any provision for interest on late payments.
- In March 1985, Risica sent Tubelite a written notice accepting the bid and asking Tubelite to begin work, which formed the contract.
- After the contract was formed, Tubelite sent an 'acknowledgment' with each shipment and monthly statements of account.
- These post-contract documents stated that a service charge of 1.5% per month (18% APR) would be applied to past-due invoices.
- Tubelite began adding these interest charges to Risica's account after April 30, 1986.
- Although Risica never formally objected to the interest charges, it also never paid any of them.
- Tubelite credited all partial payments made by Risica to the principal balance owed, not to the accrued interest charges.
Procedural Posture:
- Tubelite filed suit against Risica in trial court for an outstanding principal balance and statutory prejudgment interest.
- Risica filed a counterclaim, alleging that Tubelite had charged usurious interest in violation of state law.
- After a bench trial, the trial court found in favor of Tubelite, ruling that a course of dealing had created an implied agreement to pay interest, and dismissed Risica's counterclaim.
- Risica, as appellant, appealed to the Texas Court of Appeals.
- The Court of Appeals reversed the trial court's judgment, finding no evidence of an implied agreement, and rendered judgment for Risica, the appellee, on its usury counterclaim.
- Tubelite then appealed to the Supreme Court of Texas.
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Issue:
Does a seller's repeated inclusion of an interest charge on post-contract invoices and statements, to which the buyer never objects but also never pays, create an implied agreement to modify the contract to include the interest term through a course of dealing?
Opinions:
Majority - Justice Cornyn
No. A seller's unilateral addition of an interest term after a contract is formed does not modify the contract through a course of dealing simply because the buyer fails to object. An implied agreement requires a mutual intention to contract, which is not established by the buyer's silence or by partial payments that do not exceed the principal amount owed. The court reasoned that the contract was formed when Risica unconditionally accepted Tubelite's original quotation, which contained no interest term. The subsequent acknowledgments and invoices with the new interest term were not part of the contract formation process governed by UCC § 2-207 (the 'battle of the forms'), as they were sent after the contract was already established. The court held that modifying a contract requires evidence of mutual assent. Risica's mere failure to object to the unilaterally imposed charge was not affirmative conduct demonstrating acquiescence. Furthermore, Risica’s partial payments were not evidence of an agreement to pay interest, as the payments were equally consistent with an intent to pay down the principal only. Thus, no implied agreement to modify the contract was ever formed.
Analysis:
This decision clarifies the high bar for modifying a contract through a 'course of dealing' under the UCC. It establishes that one party cannot unilaterally impose a material new term, such as an interest charge, after a contract has been formed. The ruling emphasizes that acquiescence requires more than mere silence or failure to object; it requires affirmative conduct demonstrating a 'mutual intention' to be bound by the new term. This holding protects parties from having contracts altered by post-formation documents and reinforces the principle that modification, like formation, requires a meeting of the minds.
