29 F.3d 1173, 1178 (7th Cir. 1994)
In 1987 Northrop Corporation, a large defense contractor, sent requests for offers to several manufacturers including Litronic Industries to supply customized printed wire boards designated as 1714 Boards.1
The request stated that any resulting purchase order would set terms overriding inconsistent offer terms.2 Litronic responded with an offer to sell four boards for nineteen thousand dollars each with delivery within six weeks, a ninety-day warranty stated to be in lieu of any other warranties, and a provision that its offer terms would take precedence over buyer terms.3
Northrop purchasing officer Lynch accepted the offer by telephone up to his twenty-four thousand nine hundred ninety-nine dollar authority limit and stated that a formal purchase order would follow.4 Litronic began production immediately after the call.5
Lynch later sent a turn-on letter authorizing production of all four boards.6 A purchase order was mailed up to four months after the telephone conversation.7 The purchase order contained an unlimited warranty and required written acknowledgment from the seller, which Litronic never provided and Northrop never pursued.8
Litronic delivered the first three boards in July 1988 more than a year after the telephone acceptance.9 Northrop tested the boards over the following five or six months and returned them in December and January claiming defects, but Litronic refused the returns on the ground that its ninety-day warranty had expired.10
Northrop filed suit in federal district court seeking recovery of payments made for the 1714 boards and for a separate unrelated set of boards also claimed to be defective.11 The magistrate judge awarded Northrop fifty-eight thousand dollars for the three delivered 1714 boards but denied recovery on the other boards on the ground that Northrop had failed to return them.12 Both parties appealed the magistrate judge's decision to the United States Court of Appeals for the Seventh Circuit.13
Whether the discrepant warranty terms in the offer and acceptance determine the contract terms under UCC § 2-207 when Illinois courts have not addressed the issue?14
When an acceptance contains terms different from the offer, UCC § 2-207 forms a contract but does not specify the resulting terms; the majority view, which Illinois would likely adopt given its tendency to follow majority rules in UCC cases and the interest in uniformity, is that the discrepant terms drop out and are replaced by UCC gap-fillers.15
No. The discrepant terms do not determine the contract terms; the gap-filler does.16
The terms in Litronic's offer and Northrop's acceptance differed materially on the warranty duration.17 Under the majority view of UCC § 2-207 that Illinois would adopt, the discrepant terms therefore drop out.18 The reasonable time provision of UCC § 2-309 governs instead.19 Northrop's rejection after five or six months of testing complex boards was timely under that gap-filler.20
The warranty term is supplied by the UCC gap-filler of a reasonable time, entitling Northrop to recovery on the 1714 boards.21
Related opinions on this issue
Circuit Judge Ripple joins the judgment of the Court and the portion of the opinion adopting the majority approach to the battle of the forms under UCC § 2-207.22 He emphasizes that a federal court in diversity must make the best Erie guess about state law to decide the case before it.23 Ripple declines to express an institutional view on whether the majority interpretation is preferable to other interpretations.24
He notes that the constitutional prerogative of the states to determine their own jurisprudence counsels restraint by federal courts on such questions.25 Ripple observes that the National Conference of Commissioners is considering revisions to § 2-207 and welcomes input from all interested parties during that process.26
Whether a buyer who pays for but does not return allegedly defective goods must account for their disposition to recover damages?27
Under UCC § 2-711(3), a buyer who pays for defective goods obtains a security interest and may hold or resell them, but must account for their disposition to prevent double recovery if seeking damages.28
Yes. The buyer must account for the disposition of the goods.29
Northrop paid for the second set of boards but did not return them.30 It also failed to explain what happened to them.31 This failure precludes recovery of damages because Northrop might have sold or used the boards without sustaining a loss.32
Northrop is not entitled to recover damages for the second set of boards because it failed to account for their disposition.33
Whether the magistrate judge's findings on the timing of rejection and failure to return the second set of boards were clearly erroneous?34
No. The magistrate judge's findings were not clearly erroneous.35
The magistrate judge disbelieved Northrop's claim that it had returned the boards.36 The magistrate judge also found that Northrop had failed to return the second set.37 These findings are supported by the record without clear error.38
The magistrate judge's findings are affirmed as not clearly erroneous.39