Brown Machine, Inc v. Hercules, Inc. – (Qualified Acceptances; U.C.C. 2-207)
- Hercules sought to purchase a trim press from Brown Machine.
- Brown Machine sent Hercules a description of the trim press machine.
- The description sent by Brown included an indemnity provision as well as terms of purchase.
- Hercules sent an acceptance of the offer but in language that limited to the terms of the purchase.
- Hercules did not include the indemnity provision.
- Brown then sent Hercules an order acknowledgment that included the exact terms of the purchase that Hercules had sent in their acceptance, but with the original indemnity provision included as well.
- Hercules then sent a letter to Brown that changed one of the specifications of the machine.
- Brown then confirmed the specification change and shipped the machine to Hercules 2 months later.
- A Hercules Employee was injured operating the trim press and sued Brown Machine.
- Brown Machine demanded that Hercules defend the lawsuit.
- Hercules refused.
- Brown Machine settled with the Hercules employee.
- Brown Machine then sued Hercules seeking indemnification.
- Brown Machine was then awarded a jury verdict.
- Hercules appealed to the Missouri Court of Appeals on the grounds that it had never agreed to indemnify Brown Machine.
Issue: Does the addition of terms in an acceptance of an offer that expressly limits acceptance to the offer’s terms cause the added terms to become part of the contract between merchants?
Conclusion: The Missouri Court of Appeals said, “No, when an offer expressly limits acceptance to the terms of the offer, additional terms do not become part of the contract.” Trial Court’s Judgment was Reversed.
Judge Stephan writing for the Court said:
- “Price Quotes are not typically considered offers, but are considered invitations to start negotiations.”
- “Price Quotes are considered offers if the price quote contains language making it clear that agreement to the price quote is all that is required to form a contract.”
- Because of the fact that the price quote said that a Brown Machine Representative would call Hercules to discuss the price quote, Hercules could not have seen it as a firm offer.
- Therefore the Offer was Hercules’ purchase order.
- The question was whether Brown adding the initial price quote’s indemnity provision was a counter offer or an offer acceptance?
Rule: When an offer expressly limits acceptance to the terms of the offer, any additional terms to those of the offer will not become part of a contract between merchants.
Rule Proof: U.C.C. 2-207 governs the exchange between merchants of differing and independently drafted documents:
- Offeree’s response to an offer is a valid acceptance of the offer even if the acceptance contains additional or different terms unless the acceptance is expressly conditional to the offeror’s consent to the additional or different terms.
- When the Offeree’s response is made conditional to the offeror’s acceptance of the additional or different terms, the response is considered a counteroffer that the original offeror must accept for it to become a contract.
- It must be clear that the offeree will not proceed unless the additional terms added are accepted by the offeror, and therefore included in the contract.
Application to these Facts: In this case Hercules was not seen as having an unwillingness to proceed. This made Brown Machine’s acceptance not a counteroffer. The indemnity provision was not part of the contract because the language of the offer limited the offer to it’s exact terms.