Quick Summary
(Plaintiff) Brown Machine, Inc. [the seller] and (defendant) Hercules, Inc. [the buyer] had a disagreement over an indemnity clause on the purchase of a Trim Press.
Brown Machine initially submitted a proposal with an indemnification clause, but Hercules sent a purchase order without it. The court analyzed the parties’ communications and determined that the indemnification clause did not become part of the contract.
The court held that the initial proposal was an invitation to negotiate, and the purchase order was considered the offer. Since the purchase order explicitly limited acceptance of its terms, the additional terms, including the indemnification clause, were not accepted.
Therefore, the court ruled in favor of Hercules, finding that Brown Machine was not entitled to indemnification.
Facts of the Case
The dispute arose from the sale of a T-100 Trim Press by Brown Machine Inc. (plaintiff) to Hercules Inc. (defendant) in early 1976. The initial negotiations began in October 1975 when Hercules requested a quote from Brown Machine.
Brown Machine submitted a proposal to Hercules, which included terms and conditions of sale, including an indemnification clause.
After some back-and-forth communication, Hercules sent a written purchase order to Brown Machine in January 1976, where the purchase order did not include any indemnification clause.
A month later, Brown Machine sent an acknowledgment of the purchase order to Hercules, which included a confirmation of the original proposal’s indemnification clause.
The trim press was shipped to Hercules, and the agreed-upon purchase price was paid. Later, an employee of Hercules was injured while using the equipment and sued Brown.
Brown requested that Hercules honor the indemnity clause, but Hercules refused. Brown then filed a lawsuit seeking indemnification for the settlement amount paid to the injured employee.
Procedural History
- Brown Machine filed a lawsuit against Hercules Inc. for indemnification.
- The trial court entered a judgment in favor of Brown Machine and awarded damages.
- Hercules appealed the trial court’s judgment to the Missouri Court of Appeals, Eastern District.
I.R.A.C. Format
Issue
Whether the parties had agreed to an indemnification clause in their contract for the sale of the Trim Press.
Rule of Law
Under section 2-207(2) of the Uniform Commercial Code (UCC), additional terms become part of a contract between merchants unless expressly rejected or objected to by either party.
Reasoning and Analysis
The court analyzed the communications between the parties and determined that Brown Machine’s initial proposal was not a firm offer but an invitation to negotiate. The purchase order submitted by Hercules was considered the offer, and Brown Machine’s acknowledgment of the indemnity clause was viewed as an acceptance with additional terms.
However, since Hercules purchase order explicitly limited acceptance of its terms and conditions, the additional terms, including the indemnity clause, did not become part of the contract.
Furthermore, Hercules response to Brown Machine’s acknowledgment did not expressly assent to the additional terms. Therefore, the indemnification clause could not be held as part of the contract agreed upon by the parties.
Conclusion
The court ruled in favor of Hercules, finding that Brown Machine’s indemnity clause was not part of the contract between the parties.
The trial court’s judgment in favor of Brown Machine was reversed.
Key Takeaways
- A price quote is generally considered an invitation to negotiate rather than a firm offer.
- Additional terms in an acceptance become part of the contract unless expressly objected to or rejected by one of the parties.
- Both parties must expressly agree upon an indemnification clause to become part of a contract.
Relevant FAQs of this case
How does the court decide if an indemnity provision is part of a contract?
The court examines contract formation and the parties’ intentions. In Brown Machine, Inc. v. Hercules, Inc., the court considered whether the indemnity clause was explicitly agreed upon and whether the terms of the offer limited it.
When and why do parties use indemnity clauses in contracts?
Parties use indemnity clauses to allocate risk and protect themselves from financial loss.
- For example: In construction contracts, the contractor may include an indemnity clause to ensure the owner is responsible for any legal claims or accidents at the construction site.
References
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