Business Law Newsletter
| Publication year | 1982 |
| Pages | 78 |
1982, January, Pg. 78. Business Law Newsletter
Column Ed.: Jill B.W. Sisson
Englewood---770-5610
To many businessmen, the "battle of the forms" sounds like the latest science fiction box office smash. To lawyers confronted with a dispute over the terms of a contract when forms have been changed, the "battle of the forms" conjures up a nightmarish bar exam question that has no answer. It involves the exchange of written communications containing conflicting or different terms which form a contract between the parties.
The battle lines are drawn when one or both parties rely on "their agreement" to assert a right or obligation pursuant to the contract. The Uniform Commercial Code ("UCC") is assumed to be the great arbiter of the dispute; however, there are varying interpretations of the UCC section written to provide the solution. This article discusses how Colorado law would resolve this "battle of the forms."
A hypothetical fact situation is used here to demonstrate the application of the Colorado UCC and cases to a "battle of the forms" issue.
Trinkets Manufacturing Company ("Trinkets") is a company in the toy business and has no employees with design engineering expertise. The purchasing agent at Trinkets solicited bids from various manufacturers of equipment specially designed to monitor the temperature of Trinkets toy dolls cooling in the molding department during the manufacturing process. The agent has a stack of form contracts, labeled "purchase orders," written by the company's lawyer a few years ago, which have terms and conditions the most advantageous to the company when it purchases raw materials and equipment.
Across town, the owner of Heat Sink, Inc. ("Heat Sink") talked with Trinkets' agent and decided to submit a bid to manufacture the equipment. He too has a form his lawyer wrote to give him the most advantageous position as a seller of specially manufactured goods. Heat Sink's form states that the bid is subject to the terms and conditions appearing on the reverse side.
One of these terms says the goods manufactured by Heat Sink will be free from defects in material and workmanship under proper and normal use within one year from the date of shipment, and this warranty is in lieu of all other warranties of any kind, particularly excluding the UCC implied warranty of merchantability and implied warranty of fitness for a particular purpose. Another term says that purchase orders which contain language modifying, adding to or that is inconsistent with Heat Sink's terms and conditions of sale are inoperative and not binding against Heat Sink. It also states that no written or oral agreement that purports to vary those terms is binding on the company unless specifically agreed to in writing. Heat Sink's owner mailed his bid that same day.
After a review of all bids submitted, Trinkets' purchasing agent called Heat Sink and ordered the necessary equipment. The order was confirmed in writing by a Trinkets purchase order form which listed all machinery specifications. On its face, the Trinkets form says that the order is subject to the terms and conditions on the reverse side. One of those terms says that the seller expressly warrants that all articles covered by the order will not only conform to specifications, but will be fit and suitable for the specific manufacturing purpose intended, merchantable, of good material and workmanship, and free from defect. It states no time limit for this express warranty, and also clearly says that no agreement or other understanding in any way modifies the conditions of the order or binds Trinkets unless made in writing and approved by Trinkets.
Heat Sink, Inc. delivered the equipment with an invoice which contained the same limited warranty and disclaimer of implied warranties as its bid. Trinkets paid for the equipment and put it in use, but a little more than sixteen months later, its operation was beset with difficulties. The equipment was incapable of measuring temperature in the molds with any reasonable degree of accuracy. As a result, about 1,000 new Trinkets dolls were manufactured with numerous cracks and the assembly line had to be shut down indefinitely. Heat Sink, after consultation with its attorney, told Trinkets that the warranty had expired and that Heat Sink was no longer responsible for repair or replacement of the equipment. Incensed at the response, Trinkets sued Heat...
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