Appeal from Superior Court of King County. Docket No: 93-2-03648-5. Date filed: 01/06/95. Judge signing: Hon. Laura Inveen.
Authored by Walter E. Webster. Concurring: H. Joseph Coleman, Faye C. Kennedy.
The opinion of the court was delivered by: Webster
WEBSTER, J. -- This case involves a "battle of the forms." After rejecting Simplex Time Recorder's quotation, Collins Electric sent it a purchase order with a handwritten express warranty. The trial court concluded that Simplex accepted the purchase order through words and conduct. We agree: by sending Collins revised drawings in response to the purchase order, Simplex accepted Collins' purchase order. Simplex's subsequent "acknowledgment," which contained boilerplate warranty disclaimers and limitations, was not part of the contract. Consequently, the trial court correctly held Simplex liable for breach of the express warranty. But the trial court improperly awarded damages for field supervision labor and prejudgment interest. Therefore, we remand for recomputation of damages.
Simplex Time Recorder Co. is a national company specializing in fire alarm system design and supply. Based in Massachusetts, and having a Seattle office, it holds itself out as being an expert in fire alarm system design, fire alarm code interpretation, and bidding fire alarm systems. *fn1 It is a Washington Automatic Fire Alarm Association member, and that association participated in the updating of the King County fire alarm safety system code. King County notified Simplex of May 1991 revisions to the King County code and also told it that all plans submitted after August 1, 1991 would have to meet the revised code. *fn2
Collins Electric Co. is an electrical contractor experienced in commercial construction. It relies on specialty firms for such items as fire alarm systems. Larry Kirby, a Collins project manager, contacted Simplex in March 1991 regarding a permitted, but unbuilt office and parking complex known as Newport Terrace. The project owner had a prime tenant, and proceeded using a design/build construction method in which the various subcontractors were responsible for designing their own systems to conform to the owner's architectural and the tenant's general requirements. *fn3 Thus, when Kirby contacted Simplex's Michael Dixon, both parties understood that Simplex would need to design the fire alarm system. With this understanding, Dixon investigated the system requirements by talking with King County's Fire Marshall. In June 1991, on his behalf, Dixon sent another Simplex employee to a meeting that addressed Newport Terrace fire alarm system requirements. Unfortunately, the employee erroneously told Dixon that the Bellevue city code, rather than the King County code, would apply to the job. *fn4
Then, after reviewing architectural, but not structural drawings, Dixon quoted Collins $39,062 for system design and supply of devices. *fn5 Dixon later quoted $13,907 for tenant improvements, and orally added $4,000 to its $39,062 quotation. The quotations warranted Simplex products to be free from defects in materials and workship for one year, and limited recovery under that warranty to repair and replacement. It disclaimed other express and all implied warranties, had a consequential loss limitation, and placed the risk of rejection by the permitting authorities on the buyer: "approval of the system design by the authority having jurisdiction is not guaranteed." *fn6
In early October, Simplex sent Collins drawings for the project. Collins utilized the Simplex price and cost estimates in its contracts with the general contractor and the owner. And Collins sent Simplex a purchase order for the agreed amount, $56,969, but with a hand written express warranty:
Lot fire alarm equipment per quotation and King County/City of Bellevue high rise requirements for the project. All materials required for a complete system approved by the inspecting authority are included. This pricing is reflective of Simplex drawings dated 10/3/91 but does not relieve vendor from responsibility for a complete, accepted system. *fn7
Simplex revised its drawings and provided them to Collins two weeks later. Ten days after that, Simplex internally approved the purchase order and sent Collins an "acknowledgment." That acknowledgment referenced Collins' purchase order, but purported to reject the purchase order's terms:
NO ORDER WILL BE ACCEPTED SUBJECT TO ANY TERMS AND CONDITIONS OTHER THAN THOSE CONTAINED HEREIN EVEN THOUGH
OTHER TERMS AND CONDITIONS APPEAR ON BUYER'S PURCHASE ORDER. *fn8
The acknowledgment also contained the same general limitations and conditions as the earlier Simplex quotation: a limited defects warranty with a limited remedy for breach, disclaimer of all implied warranties and any express warranties except for materials and workship, and a consequential loss limitation. *fn9 The parties then went on to perform a contract without further exchange of forms or correspondence addressing its terms.
Nobody denies that Simplex's design did not conform to King County's code, that King County rejected the design, and that the redesign required Collins to do additional work and complete its existing work less efficiently. Collins also faced a compressed redesign schedule to avoid liquidated damages under its contract with the general contractor and owner. Simplex revised the plans and supplied additional devices without seeking a change order or compensation.
After a five week bench trial, the court found that Simplex had breached both the express warranty in the Collins purchase order, and the implied warranty of fitness for a particular purpose. Allowing Collins to use a modified total cost method to compute damages, it awarded a $427,155.32 judgment for breach, and added $93,636.38 in prejudgment interest.
This case concerns fundamental concepts of offer, rejection, counteroffer, and acceptance, in the context of a "battle of the forms" under Washington's Uniform Commercial Code. Preliminarily, however, the parties agree on the following characterization of early contract formation events:
1. Simplex offered to sell equipment and design services to Collins in its July 3, 1991 quotation.
2. Collins rejected that offer.
3. Collins counteroffered to buy equipment and design services from Collins in its October 16, 1991 purchase order. *fn10
Under the Uniform Commercial Code, the absence of contract formation can be characterized as follows: because Collins "dickered" over a vital term, the express warranty, its October 16 purchase order was not a definite expression of acceptance. *fn11 As a result, it was a counteroffer. While we recognize that Simplex proposes a different characterization in its reply brief, *fn12 we disagree with that characterization, and its tardiness precluded Collins from fairly defending against it.
As a result, we focus on events following Collins' counteroffer. In this regard, the Uniform Commercial Code provides that a contract may be made in any manner sufficient to show agreement, including conduct by both parties recognizing its existence. *fn13 Here, the trial court found that Collins' ...