USCA1 Opinion

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT

____________________

No. 96-1554

IONICS, INC.,
Plaintiff - Appellee,

v.

ELMWOOD SENSORS, INC.,

Defendant - Appellant.

____________________

ERRATA SHEET

The opinion of this court issued on April 8, 1997 is amended

as follows:

Page 9, line 15 change "Roto-Lith's" to "Bartlett's"

Page 12, line 8 insert period between "(1)" and footnote "5"

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT
____________________

No. 96-1554

IONICS, INC.,

Plaintiff - Appellee,

v.

ELMWOOD SENSORS, INC.,

Defendant - Appellant.

____________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Morris E. Lasker,* Senior U.S. District Judge]

__________________________

____________________

Before

Torruella, Chief Judge,

___________

Bownes, Senior Circuit Judge,

____________________

and Stahl, Circuit Judge.

_____________

_____________________

Daryl J. Lapp, with whom Thane D. Scott, Stephen L. Coco and

_____________
______________ _______________
Palmer & Dodge LLP were on brief for appellant.
__________________
Tina M. Traficanti,
____________________

with

whom

Anthony M. Doniger
____________________

Sugarman, Rogers, Barshak & Cohen, P.C.

___________________________________________

were

on

brief

and

for

appellee.

____________________

April 8, 1997
____________________

____________________

Of the Southern District of New York, sitting by designation.

TORRUELLA,
TORRUELLA,

Chief Judge.
Chief Judge.
____________

Ionics,

Inc.

("Ionics")

purchased thermostats from Elmwood

Sensors, Inc. ("Elmwood") for

installation

manufactured

Several

allegedly

of

in

the

water dispensers

dispensers

resulted from defects

suit

against Elmwood in order

wake

of

Elmwood's

subsequently

the fires.

motion for

Before

partial

in the

caused

which

Ionics filed

incurred in the

the district

summary judgment.

the former.

fires

sensors.

to recover costs

trial,

by

court denied

The

District

Court of Massachusetts subsequently

question whether, in the

certified to this court "the

circumstances of this case,

M.G.L. c. 106 has been properly applied."

2-207 of

Order of the district

court, November 6, 1995.

I.
I.

We

novo.
____

Standard of Review
Standard of Review

review the grant

or denial of

summary judgment de
__

See Borschow Hosp. & Medical Supplies v.

___ __________________________________

C sar Castillo,
_______________

Inc., 96 F.3d 10, 14 (1st Cir. 1996).

____

II.
II.

The

facts of

Background
Background

the case

are not

manufactures and sells

thermostats.

water dispensers, which

it leases

Ionics

in dispute.

Elmwood

makes hot and

to its customers.

On

cold

three

separate occasions, Ionics purchased thermostats from Elmwood for

use in its water dispensers.1

of

Every

time Ionics made a purchase

thermostats from Elmwood, it sent the latter a purchase order

form which

contained, in small

type, various "conditions."

Of

the20 conditions onthe order form,two areof particular relevance:

____________________

Orders were placed in March, June, and September 1990.

-2-

18.

REMEDIES -- The

Buyer herein shall

addition to any

be cumulative, and in

other remedies

provided

A waiver of

a breach

by law or equity.
of

any

remedies provided

provision

hereof

constitute a waiver of any

The

laws of the

shall

in Buyer's

on the masthead

apply

in the

not

other breach.

state shown

address printed
order

shall

of this

construction

hereof.

19.

ACCEPTANCE

Seller of

--

this order

Acceptance

by the

shall be upon

the

terms and conditions set forth in items 1

to

17 inclusive,

order.

Said

only on

the exact

forth.

and elsewhere

order

No terms

can be

in this

so accepted

terms herein

and set

which are in any manner

additional

to

or

different from

those

herein set

forth shall become a part of,

alter or in any way control the terms and

conditions herein set forth.

Near

the time when

sent Elmwood a letter that it

Ionics placed its

first order, it

sends to all of its new suppliers.

The letter states, in part:

The

information

and/or

typed

preprinted,

on our

especially important
take

exception

please

written

purchase
to us.

to

this

clearly express

order is
Should you

information,

any reservations

to us in writing.

If you do not, we will

assume

have

that

you

agreed

to

the

specified terms and that you will fulfill

your

obligations

purchase
change

order.

according

to

If necessary,

our

we will

your invoice and pay your invoice

according to our purchase order.

Following receipt

sent an

of each order, Elmwood

"Acknowledgment" form containing the

prepared and

following language

in small type:

THIS WILL ACKNOWLEDGE RECEIPT

ORDER AND STATE

OF BUYER'S

SELLER'S WILLINGNESS

SELL THE GOODS ORDERED BUT ONLY UPON

TO
THE

TERMS AND CONDITIONS SET FORTH HEREIN AND

-3-

ON

THE

REVERSE

COUNTEROFFER.

SIDE

HEREOF

BUYER SHALL BE

AS

DEEMED TO

HAVE ACCEPTED SUCH COUNTEROFFER UNLESS IT

IS
DAYS

REJECTED IN
OF

THE

SUBSEQUENT
THE

RECEIPT

ACTION

TERMS

CONDITIONS

ONLY;

TERMS

HEREOF,

SHALL BE

AND

COUNTEROFFER
DIFFERENT

WRITING WITHIN

ANY

TEN (10)
AND

PURSUANT TO
OF

ADDITIONAL

ARE HEREBY

ALL

THIS
OR

OBJECTED TO

AND SHALL NOT BE BINDING UPON THE PARTIES

UNLESS SPECIFICALLY AGREED TO
BY SELLER.

IN WRITING

Although

wish to emphasize

form

on

which

"Acknowledgment"

this passage refers

that this

the

language is not

language

and the

to a

appears

language

"counteroffer," we

controlling.

is

comes under

labelled

a heading

reads "Notice of Receipt of Order."

The form, taken

appears

confirmation rather

to contemplate

an order's

The

an

that

as a whole,

than an

order's rejection in the form of a counteroffer.

It

prior

is undisputed that

to the

district court,

arrival of

the shipment

in its ruling

states that "with each

the Acknowledgment was received

on the

of goods.

summary judgment

motion,

shipment of thermostats, Elmwood included

an Acknowledgment Form," Order of the District

1995, this statement cannot

support of the

Although the

claim that

Court, August 23,

reasonably be taken as a

the Acknowledgment

and the

finding in

shipment

arrived together.

First, in its certification order,

the court

states that "[t]he purchaser, after receiving the Acknowledgment,

_____

accepted

delivery

of

Pursuant to 28 U.S.C.

This

language is

the

goods

without

objection."

1292(b), Nov. 6, 1995

clearer

statement and suggests that

and more

precise

(emphasis added).

than the

the former was simply a

-4-

Order

previous

poor choice

of phrasing.

time

Furthermore, Ionics has

of the

Acknowledgment.

Defendant's Motion for

under the heading

each

of the

In its

not disputed the

Memorandum in

arrival

Support of

Partial Summary Judgment Elmwood

stated,

of "Statements of Undisputed Facts," that "for

three

orders, Ionics

prior to receiving the

received the

shipment of thermostats."

Acknowledgment

Memorandum

in

Support of Defendant's Motion for Partial Summary Judgment, at 3.

In

its own memorandum, Ionics argued that there existed disputed

issues of material

regarding

the

fact, but did not

arrival

Plaintiff's

Memorandum

Defendant's

Motion

Furthermore,

for

of

the

in

Support

Partial

contradict Elmwood's claim

Acknowledgment

of

Summary

in its appellate brief,

its

Form.

See
___

Opposition

to

Judgment

at

4-10.

Ionics does not argue that

the time of

Ionics

arrival of

repeats

the Acknowledgment Form

language

judgment ruling that "with

from

the

district

is in

dispute.

court's

summary

each shipment of thermostats, Elmwood

included an Acknowledgment Form," Appellee's Brief at 7, but does

not argue that the issue

is in dispute or confront

the language

in Elmwood's brief which states that "[i]t is undisputed that for

each

prior

of the

three

to receiving

orders, Ionics

the shipment

received the

Acknowledgment

of thermostats."

Appellant's

Brief at 6.

As

Elmwood's

we have

willingness

conditions" that the

noted, the

to

sell

Acknowledgment Form

thermostats

Form indicated were

on

expressed

"terms

listed on the

and

reverse

-5-

side.

Among the terms and conditions listed on the

back was the

following:

9. WARRANTY
All

goods

manufactured

Sensors, Inc. are

of

defects

for a

in material

such

free

and workmanship
(90) days

after

goods

by

Buyer

or

from

the

date

of

manufacturer [sic] (as

evidenced by

the

manufacturer's

code),

eighteen

of

Elmwood

guaranteed to be

period of ninety

receipt

by

months

date

whichever

shall be

longer.

THERE

IS NO

IMPLIED

WARRANTY OF MERCHANTABILITY AND

WARRANTY,
SUCH

EXPRESSED

AS IS

SELLER
GENERAL,

OR IMPLIED,

EXPRESSLY SET

WILL

NOT

NO OTHER

BE

FORTH HEREIN.

LIABLE

CONSEQUENTIAL

EXCEPT

OR

FOR

ANY

INCIDENTAL

DAMAGES, INCLUDING WITHOUT LIMITATION ANY

DAMAGES
BREACH

FROM LOSS
OF

WARRANTY

SELLER'S LIABILITY
REMEDY

BEING

REPAIR

OF

SHIPPING
HEREOF

OF PROFITS,
OR FOR

NEGLIGENCE,

AND BUYER'S EXCLUSIVE

EXPRESSLY

DEFECTIVE
POINT

FROM ANY

LIMITED TO

GOODS

INDICATED

OR THE REPAYMENT

ON

THE

F.O.B.

THE

THE

FACE

OF THE PURCHASE

PRICE UPON THE RETURN OF THE GOODS OR THE

GRANTING

OF

ACCOUNT OF

A
ANY

REASONABLE ALLOWANCE
DEFECTS, AS

SELLER

ON
MAY

ELECT.

Neither party

contract

purchased,

and

neither

disputes that they entered

disputes

the price paid, or

the

quantity

the manner and

of

into a valid

thermostats

time of delivery.

The only issue in dispute is the extent of Elmwood's liability.

In

that

summary, Ionics'

the contract

included

would be

on the purchase

under state law would

order

included language

governed exclusively

order and that

by

stating

the terms

all remedies available

be available to Ionics.

In a

subsequent

letter, Ionics added that Elmwood must indicate any objections to

these

conditions in writing.

Elmwood, in turn,

-6-

sent Ionics an

Acknowledgment stating that the contract was governed exclusively

by the terms in the Acknowledgment, and Ionics was given ten days

to reject this "counteroffer."

Acknowledgment is a

district court

Among the terms included

limitation on Elmwood's

stated, "the

liability.

terms are diametrically

each other on the issue of whether all warranties

were

reserved or waived."

Order of the

in the

As

the

opposed to

implied by law

District Court, August

23, 1995.

We face, therefore,

purely a

question of

contract is governed

law.

by the

a battle

The dispute

of the forms.

turns

language after

This

on whether

the comma

in

is

the

2-

207(1) of the Uniform Commercial Code, according to the rule laid

down by this court in Roto-Lith, Ltd. v. F.P. Bartlett & Co., 297
_______________
___________________

F.2d 497 (1st Cir. 1962), or whether it is governed by subsection

(3) of

Mass.

the Code

provision, as

Gen. L. ch. 106,

2-207

Island, R.I. Gen. Laws

Roto-Lith
_________

enacted

by both

(1990 and 1996 Supp.), and Rhode

6A-2-207 (1992).2

to be in conflict

(3) governs the contract.3

We find the

with the purposes

and, accordingly, we overrule

Massachusetts,

rule of

of section 2-207

Roto-Lith and find that subsection

_________

Analyzing the case under

section 2-

____________________

There

is

some

uncertainty

Massachusetts or Rhode Island

on

the

question

law governs.

We need

of

whether

not address

this issue, however, because the two states have adopted versions
of

section

2-207

of

the

Uniform

Commercial

Code

that

are

virtually equivalent.

Although panel
on

newly

decisions of this court

constituted

panels,

that

are ordinarily binding

rule does

not

obtain

in

instances where, as here, a departure is compelled by controlling

authority

(such as

the interpreted

relatively rare instances, we

statute

itself).

In such

have sometimes chosen to circulate

-7-

207, we conclude that Ionics defeats Elmwood's motion for partial

summary judgment.

III.
III.

Our analysis

Legal Analysis
Legal Analysis

begins with

the statute.

Section 2-207

reads as follows:

2-207.

Additional Terms in Acceptance

or Confirmation

(1)

A definite and seasonable expression

of acceptance or
which

is sent

a written
within a

operates as an

confirmation

reasonable time

acceptance even though it

states terms additional

to or

different

from those offered or agreed upon, unless

acceptance is

expressly made conditional

on assent to the additional

or different

terms.

(2)

The

are

to be

addition

additional or
construed
to

merchants

the

different terms

as

proposals

contract.

such terms become

for

Between
part of the

contract unless:
(a)

the

acceptance

offer expressly
to

the

terms

limits
of

the

offer;
(b)

they materially alter it; or

(c)

notification

them has already

given

within

of objection

to

been given or

is

reasonable

time

after notice of them is received.

(3)

Conduct

by

both

parties

which

recognizes the existence of a contract is

____________________

the
court

proposed overruling
prior

opinion to

to publication

even

precedent is reasonably clear.

586, 591 n.7 (1st
Rivera V zquez,
_______________
procedure

is,

active members

though the

need

of the

to overrule

See, e.g., Wright v. Park, 5 F.3d

___ ____ ______
____

Cir. 1994); Trailer Marine Transport Corp. v.

_______________________________
977

of

all

F.2d

1, 9

n.5

course, informal,

suggestion of rehearing

(1st
and

Cir.
does

en banc on any issue.

1992).
not

This

preclude a

We have followed

that praxis here and can report that none of the active judges of
this

court

has

objected to

conclusion that Roto-Lith has

_________

the

panel's

analysis

or to

its

outlived its usefulness as circuit

precedent.

-8-

sufficient

to

establish a

contract for

sale although the writings of the parties

do

not

otherwise establish

In

such case the terms of the particular

contract consist of
the

writings

together

of

with

incorporated

any

a contract.

those terms on which

the

parties

agree,

supplementary

under any

terms

other provisions

of this chapter.

Mass. Gen. L. ch. 106,

In

Bartlett,

2-207 (1990 and 1996 Supp.).

Roto-Lith,
_________

who responded

Roto-Lith

with

an

sent

purchase

acknowledgment that

language purporting to limit Bartlett's liability.

not object.

"a

Roto-Lith, 297 F.2d at 498-99.

_________

response which

states

a condition

order

to

included

Roto-Lith did

This court held that

materially altering

the

obligation solely

to

'acceptance * * *

expressly * * * conditional

additional *

the

disadvantage

* * terms.'"

of the

Id. at 500.
___

offeror

is

on assent to

This holding

an

the

took the

case outside of section 2-207 by applying the exception after the

comma in subsection

and concluded

of the

(1).

The court then reverted

that Roto-Lith "accepted the

conditions specified in the

became bound."

concluded

assent,

Id. at 500.
___

that

by

constituted

Roto-Lith

conditions,

the

buyer,

a counter

accepted

it

the

to

acceptance

the

new

offer rather

goods

accepted the

goods with knowledge

acknowledgment [and thereby]

In other words,

the defendant's

to common law

with

the Roto-Lith court

_________

was conditional

terms

than an

and,

counteroffer and

therefore,

acceptance.

knowledge

of

on

When

Bartlett's

Bartlett's terms

governed the contract.

Elmwood argues that Roto-Lith governs the

_________

-9-

instant

appeal,

implying

that

the

terms

of

Elmwood's

acknowledgment govern.

Ionics claims that the instant

because

in Roto-Lith "the
_________

case is distinguishable

seller's language limiting warranties

implied

at law was

conflict

proposed as an

with, the explicit terms of

instant case] the explicit

distinguishes

It

conflicts

with

refusing

to enforce

terms

that Ionics'

Roto-Lith.
_________

that

language

of the contract.

[In the

forms conflict

Appellee's Brief at 21.

not believe

language

was not in

the buyer's form.

terms of the parties'

with and reject each other."

We do

addition to, but

would

be

position sufficiently

artificial to

background

legal

that conflicts

rules

with the

enforce

while

express

Every contract is assumed to incorporate

the existing legal norms that

are in place.

It is

not required

that every contract explicitly spell out the governing law of the

jurisdiction.

deviations

Allowing

later forms

to govern

with respect

to

from the background rules but not deviations from the

terms in

the contract

would imply

contract

could be relied upon.

Aside from

and arbitrary distinction, such a

parties

that

rules.

terms in

the

being an artificial

standard would, no doubt, lead

to include more of the background rules in their initial

forms, making forms

would

that only the

longer and more

be more difficult and

even

fewer forms

time consuming to

would be

It is the failure of

complicated.

read

Longer

read -- implying

than under

the existing

firms to read their forms that

-10-

forms

has

brought this case before us, and we do not wish

to engender more

of this type of litigation.

Our inquiry,

however, is

that we cannot distinguish

the Uniform

Commercial

not complete.

Having found

this case from Roto-Lith, we

_________

Code, quoted

above.

A plain

turn to

language

reading of section 2-207 suggests that subsection (3) governs the

instant

case.

Ionics sent

an initial

responded with its "Acknowledgment."

the parties established

by section 2-207(3).

offer to

which Elmwood

Thereafter, the conduct of

the existence of a

contract as required

Furthermore,

the case before

us is squarely addressed

in comment 6, which states:

6.

If

no answer

reasonable
are

time

proposed,

is received

after additional
it

is

commercially sound to
inclusion

within a

has been

both

terms

fair

assume that

and
their

assented to.

Where

clauses on confirming forms sent

by both

parties

conflict[,]

must be

assumed

to

other

each party

object to

conflicting

confirmation

sent

a
with

by

objection

subsection

(2) [of

and the
part

one

consists

of

the

expressly agreed
confirmations

the
As

that there

which is

be

found

in

2-207] is satisfied

conflicting terms do

of the contract.

the

on

himself.

result[,] the requirement

notice of

clause of

not become

The contract then

terms

to, terms on

agree, and

originally
which the

terms supplied

by this Act.

Mass. Gen. L. ch.

6.

This

106,

2-207, Uniform Commercial

Comment addresses

precisely the facts

Code Comment

of the

instant

case.

Any

attempt at

distinguishing the

case before

us from

section 2-207 strikes us as disingenuous.

-11-

We are faced, therefore, with a contradiction between a

clear precedent of this court, Roto-Lith, which suggests that the

_________

language after the comma in subsection (1) governs, and the clear

dictates

of the

Uniform

subsection (3) governs.

exist and

conflict.

previous

It

the case at

We

Commercial Code,

is our view that the two

bar offers a graphic

have, therefore,

no choice

that

cannot co-

illustration of the

but to

overrule our

decision in Roto-Lith, Ltd. v. F.P. Bartlett & Co., 297

_______________
___________________

F.2d 497 (1st

Cir. 1962).

line with the

majority view on

case

which indicate

that has

Our decision brings this

the subject and

provoked considerable

circuit in

puts to rest

criticism from

courts and

commentators and alike.4

We

hold, consistent

Comment 6, that where

each

the terms in two forms

and Official

are contradictory,

party is assumed to object to the other party's conflicting

clause.

is

with section 2-207

As a result, mere acceptance

of the goods by the buyer

insufficient to infer consent to the seller's terms under the

language of

subsection (1).5

Nor

do such terms

become part of

____________________

See, e.g.,
___ ____
939 F.2d

Step-Saver Data Systems, Inc. v.

______________________________

91, 101 (3d Cir.

1991); St. Charles Cable TV, Inc. v.

___________________________

Eagle Comtronics, Inc., 687 F.

_______________________
1988); Daitom
_______

Wyse Technology,
_______________

Supp. 820, 828

v. Pennwalt Corp.,
______________

741 F.2d

& n.19 (S.D.N.Y.

1569, 1576-77

(10th

Cir. 1984); Luria Bros. v. Pietlet Bros. Scrap Iron & Metal, 600
___________
_________________________________
F.2d 103, 113 (7th Cir. 1979); Dorton
______
453 F.2d 1161,

v. Collins & Aikman Corp.,

______________________

1168 & n.5 (6th Cir. 1972);

Robert S. Summers, 1 Uniform Commercial Code,

James J. White &

1-3, at 12, 16-17

(1995); Murray, Intention over Terms: An Exploration of UCC 2-207

&

New Section 60, Restatement

of Contracts, 37

Fordham L. Rev.

317, 329 (1969).

See also
_________

Official Comment

("If

[additional or

different

terms] are such as materially to alter the original bargain, they

will

not be

included unless

expressly agreed

-12-

to by

the other

the

contract

objection has

under

subsection

been given

by the

(2)

because

notification

conflicting forms.

See
___

of

2-

207(2)(c).

The

alternative

result,

advocated

by

Elmwood

and

consistent with Roto-Lith, would undermine the role of section 2_________

207.

Elmwood

acknowledgment

alters

suggests that

constitutes

the terms proposed by

"a seller's

expressly conditional

a counteroffer

the buyer, and

where

it materially

the seller's terms

govern the

and pays

contract between the

for the goods."

parties when the

Appellant's Brief at 12.

buyer accepts

Under this

view, section 2-207 would no longer apply to cases in which forms

have been exchanged and subsequent disputes reveal that the forms

are contradictory.

That is, the last form would always govern.

The purpose

of section 2-207, as

stated in Roto-Lith,
_________

"was to modify the strict principle that a response not precisely

in accordance with the offer was a rejection and a counteroffer."

Roto-Lith,
_________

Corp.,
_____

297 F.2d at 500; see also Dorton v. Collins & Aikman

_________ ______
________________

453 F.2d

1161,

section

2-207 "was

'mirror'

rule of

1165-66 (6th

intended to

common

law,

Cir.

alter the

under

which

1972) (stating

that

'ribbon-matching' or

the

terms

of

an

acceptance

or confirmation were required to

terms of the offer").

be identical to the

Under the holding advocated

by Elmwood,

virtually any response that added to or altered the terms of

offer would be

a rejection and a counteroffer.

____________________

party.").

-13-

the

We do not think

that such a result is consistent with the intent of section 2-207

and we believe it to be expressly contradicted by Comment 6.

Applied

conclusion

to

that the

this

case,

contract is

our

holding

governed by

leads

to

the

section 2-207(3).

Section 2-207(1) is inapplicable because Elmwood's acknowledgment

is conditional on assent to the additional terms.

The additional

terms do not become a part of the contract under section 2-207(2)

because notification of objection

on

the order

those

in the

form and

because the

offer.

Finally,

demonstrates the existence of a

2-207(3).

to conflicting terms was given

new terms

the

conduct

materially alter

of

the

parties

contract, as required by section

Thus, section 2-207(3)

applies and the

terms of the

contract are to be determined in accordance with that subsection.

We conclude, therefore, that section

2-207(3) prevails

and

"the terms of the particular contract consist of those terms

on which the

writings of

the parties agree,

supplementary terms incorporated

this chapter."

under any

Mass. Gen. L. ch. 106,

together with

any

other provisions

of

2-207(3).

The reality of modern commercial dealings, as this case

demonstrates, is that not all participants read their forms.

See
___

James J. White & Robert S. Summers, Uniform Commercial Code

_______________________

1-3

at

fly

6-7 (4th ed. 1995).

in the face

To

uphold Elmwood's view would not only

of Official Comment

6 to section

2-207 of the

Uniform Commercial Code, and the overall purpose of that section,

it would also fly in the

last

form

(in

the

face of good sense.

instant

case,

the

The sender

seller)

could

of the

insert

-14-

virtually any conditions it

conditions

form,

contrary to

chooses into the contract, including

those in

the initial

form.

The final

therefore, would give its sender the power to re-write the

contract.

Under our holding

today, we at

least ensure that

party will not be held to terms that are directly contrary to the

terms it has included in its own form.

a failure to object to the

Rather than assuming that

offeree's conflicting terms indicates

offeror's

assent

to

those

reasonable inference that

terms,

we

shall

each party continues to

other's contradictory terms.

We think

make

the

more

object to the

it too much to grant

the

second form the power to contradict and override the terms in the

first form.

-15-

IV.
IV.

For

the reasons

Conclusion
Conclusion

stated herein,

order denying

Elmwood's motion

affirmed
affirmed
________

the case

and

further proceedings.

the district

for partial summary

is remanded
remanded
________

to

the district

court's

judgment is

court for

-16-