Problems Due: 8-10, 12-14
Cases Due:
St. Ansgar,
JBB Investment Partners, Ltd,
Columbia,
Diamond,
Bayway
Problems Due:
15
16
17
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19
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23
Cases Due:
UltraFlex Systems of Florida v. Veritiv Operating Co.
Rule of Law If an initial purchase order and a written sale confirmation contain directly conflicting
terms, neither set of terms is included in the resulting contract.
If an initial purchase order and a written sale confirmation contain directly conflicting terms, neither
set of terms is included in the resulting contract.
Facts - Ultraflex Systems of Florida, Inc. (Ultraflex) (plaintiff) [[was a distribution company
specializing in substrate fabrics and accessories used for digital printing.]] and Veritiv Operating
Company (Veritiv) (defendant) [[was a distributor of packaging, facility solutions, and print and
publishing products and services. The two companies]] did regular business with each other for 10
years and exchanged routine business documents. Veritiv began transactions by sending electronic
purchase orders that stated its terms and conditions of purchase. Veritiv’s terms included Delaware
governing-law and venue provisions. Ultraflex then replied with a sales confirmation that included its
own terms and conditions of sale. Ultraflex’s terms and conditions contained New Jersey governinglaw and venue provisions. A dispute arose when Veritiv sent several purchase orders, Ultraflex sent
sales confirmations, and Veritiv refused to pay. In accordance with its terms and conditions, Ultraflex
filed suit against Veritiv for breach of contract in the United States District Court for the District of
New Jersey. Veritiv filed counterclaims against Ultraflex regarding an allegedly defective order that
was not refunded. Veritiv also moved to transfer the case to the United States District Court for the
District of Delaware or to have the case dismissed, subject to its own terms-and-conditions provisions.
The court specifically assessed which of the companies’ terms and conditions controlled in the dispute
for governing law and venue.
Issue-Whether conflicting terms in a purchase order and a written sale confirmation, are included in
the set of terms in the contract?
Holding and Reasoning (Hammer, J.) Yes. If an initial purchase order and a written sale
confirmation contain directly conflicting terms, neither set of terms is included in the resulting
contract.
Proof of a contract can be established by a written confirmation that is sent within a reasonable time
after the offer, unless the confirmation conditions acceptance on the inclusion of additional terms. The
Uniform Commercial Code (UCC) is unclear on the specific fate of directly conflicting terms in an
initial offer and a written confirmation. The rule in a majority of jurisdictions states that conflicting
terms are knocked out and not included in the resulting contract. Delaware and New Jersey court
precedents indicate a willingness to adopt the knockout rule. The knockout rule follows the UCC’s
view that a buyer should not be bound by the standard terms of a seller if neither party cared to
expressly establish terms and the seller happened to send the last form. In this case, valid contracts
were formed. Ultraflex accepted Veritiv’s purchase offers by sending sales confirmations and by not
conditioning acceptance on assent to its own terms and conditions. However, the governing-law and
venue provisions differ in the sales documents sent by each company. Therefore, both the governinglaw and venue provisions are knocked out of the resulting contract due to direct conflict. Absent the
contractual provision, Veritiv fails to provide substantive grounds for transfer under the rules of civil
procedure. As a result, Veritiv’s motion to transfer is denied.
Klocek v. Gateway
United States District Court, District of Kansas
104 F. Supp.2d 1332 (2000)
Rule of Law -Additional or different terms provided in the acceptance do not become terms of
the contract unless acceptance is made expressly conditional upon acceptance of the additional
terms or the non-merchant offeror expressly agrees to the additional terms.
Facts - Klocek (plaintiff) ordered a computer from Gateway (defendant). Gateway included its
Standard Terms in every shipment of a new computer. At the top of the first page of those terms
Gateway informed the purchaser that keeping the computer beyond five days constituted
acceptance of the terms and conditions. Included in the Standard Terms was an arbitration
clause. Klocek and others filed suit in the United States District Court against Gateway and
others regarding the purchase of Gateway computers. Gateway moved to dismiss, requesting that
the arbitration clause be enforced.
Issue -Whether a purchaser of a good must comply with added terms to an existing when the
form states that failure to return the goods constitutes acceptance?
Holding and Reasoning (Vratil, J.)-No. Arbitration clauses are favored, but an arbitration clause
must be valid in order for it to be enforced. Section 2-207 of the Uniform Commercial Code
(UCC) is often said to apply when there is a “battle of the forms,” but will also apply to cases
involving only one form. The official comment thereto states that this section will apply where
an oral agreement is reached and one or both of the parties sends a form memorializing the
agreement and adds additional or different terms. The buyer is typically the offeror in a sales
transaction. An acceptance will be deemed a counter-offer only when the acceptance is made
conditional upon the offeror’s consent to the additional or different terms. When the offeror is
not a merchant, section 2-207 provides that additional terms in the acceptance do not become
part of the agreement unless the offeror expressly agrees to them. In the current matter, section 2207 applies even though Standard Terms included in the package was the only form involved in
the transaction. The Standard Terms constitute Gateway’s acceptance of the offer. It is not a
counter-offer because Gateway’s acceptance was not made conditional upon Klocek’s consent to
the additional terms. Moreover, the additional terms in the Standard Terms are not enforceable
because Klocek did not expressly agree to them. Klocek’s keeping the computer beyond five
days was not sufficient to constitute express agreement to the additional terms. Accordingly,
Gateway’s motion to dismiss is overruled.
In re Toshiba America HD DVD Marketing and Sales Practices Litigation
United States District Court for the District of New Jersey
69 U.C.C. Rep. Serv. 2d 1085 (2009)
Rule of Law -Under the Uniform Commercial Code (UCC), an express warranty is created when a
seller makes a promise or affirmation of fact relating to the goods that becomes part of the basis of the
bargain.
Facts - Toshiba (defendant) manufactured and sold video players for high definition digital video discs
(HD DVDs), which were intended to be the next generation of technology following standard DVDs.
Toshiba’s main competitor was Sony Corporation, which marketed Blu-ray Discs as the next
generation technology to DVDs. All of the major movie studios eventually decided to release their
movies in Blu-ray format rather than HD DVD, and Toshiba decided to discontinue its future
production of HD DVD players. Despite this, Toshiba continued to advertise its HD DVD players as
being “For Today, Tomorrow and Beyond.” Some consumers (plaintiffs) who purchased a Toshiba
HD DVD player sued Toshiba for breach of an express warranty, among other things.
Issue -Is an express warranty created when a seller makes a promise or affirmation of fact relating to
the goods that becomes part of the basis of the bargain?
Holding and Reasoning (Debevoise, J.)- Yes. Under Uniform Commercial Code (UCC) § 2-313, an
express warranty is created by any promise or affirmation of fact relating to the goods, or any
description of the goods, made by the seller to the buyer, that becomes part of the basis of the bargain.
To create an express warranty, it is not necessary for the seller to use formal words such as warrant or
guarantee, or for the seller to intend to create a warranty. However, an affirmation of the value of the
goods or a statement that is the seller’s opinion or commendation of the goods is mere puffery and
does not create a warranty. Here, the plaintiffs argue that Toshiba’s advertisement that its HD DVD
players could play HD DVDs “Today, Tomorrow and Beyond” created an express warranty that
Toshiba would continue to support the HD DVD format, which Toshiba breached when it decided
that it would exit the HD DVD market. However, the statement that the HD DVD players were “For
Today, Tomorrow and Beyond” is mere puffery and is not specific enough to create an express
warranty. Moreover, even if these words did create a warranty as to the future performance of the HD
DVD players, there is no allegation that the players do not perform as intended, because the plaintiffs
do not allege that the HD DVD players can no longer play existing HD DVDs. The plaintiffs have
failed to state a claim for breach of an express warranty, and the claim is therefore dismissed.
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