Monday, January 27, 2014

MHD-Rockland Inc. v. Aerospace Distributions Inc. (Maryland U.S.D.C.)

Filed:  January 3, 2014

Opinion by Catherine C. Blake

Holdings:  (1) In a transaction between merchants, an acceptance that contains the words “subject to” along with additional terms does not render the acceptance “expressly made conditional on assent to the additional terms” for purposes of Section 2-207(1) of the Commercial Law Article.

(2) In a transaction between merchants, objection to the condition of goods and the return of such goods is not a timely objection of additional terms in an acceptance for purposes of Section 2-207(2) of the Commercial Law Article. 
Facts:  Plaintiff, through use of a purchase order, ordered four airplane wheel assemblies in “overhauled” condition from defendant.  Defendant sent the assemblies and an acknowledgment form representing that the assemblies were in overhauled condition.  The acknowledgment form further stated it was “subject to” the Conditions of Sale printed on the reverse side of the form, which purported to limit liability for consequential damages and disclaim any express or implied warranties.  Plaintiff returned two assemblies allegedly not in overhauled condition, which were therefore defective.  Disagreements arose whether the two returned assemblies were defective. 

Plaintiff alleged, among other claims, breach of contract.  Defendant argued plaintiff should not be allowed to seek lost profits because the contract expressly foreclosed any warranty, including liability for consequential damages.  Plaintiff claimed it rejected the conditions upon return of the assemblies. 
Analysis:  The Court applied Section 2-207 of the Commercial Law Article as the case involved a sale of goods between merchants.  Section 2-207 provides an acceptance containing additional terms is still an acceptance that forms a contract unless the “acceptance is expressly made conditional on assent to the additional or different terms.”  The Court noted that Maryland courts have not decided whether an acceptance “subject to” additional terms amounts to an acceptance “expressly made conditional.”  The Court agreed with cited precedent that concluded the “subject to” language does not make the acceptance expressly conditional on the buyer’s assent to the additional terms.  Accordingly, the Court held that defendant’s acceptance of the purchase order was not expressly made conditional on plaintiff’s assent to the additional terms in the Conditions of Sale.

Section 2-207 further provides that if there is an acceptance, the additional terms become part of the contract between merchants unless: “(a) [t]he offer limits acceptance to the terms of the offer; (b) [t]hey materially alter it; or (c) [n]otification of objection to them has already been given or is given within a reasonable time after notice of them is received.”  The Court noted that the plaintiff did not allege how and when it rejected the additional terms.  The Court stated that plaintiff’s objection to the condition of the assemblies does not amount to a timely objection to the additional terms in the defendant’s acceptance.  The Court dismissed the claim for lost profits from the alleged breach of contract. 
In a lengthy footnote, the Court also discussed an argument that the terms should be excluded from the contract because they materially alter the agreement.  The Court stated that such argument, if raised, would have failed under the applicable Maryland test. 

The full opinion is available in PDF.

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