This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
The case concerns a contract dispute between a general contractor and a manufacturer over the purchase of air-conditioning equipment (chillers) for a Department of Energy (DOE) project. The contractor's purchase order included a one-year manufacturer's warranty and specific compliance requirements, while the manufacturer's acknowledgment form contained warranty disclaimers and additional terms. The chillers were delivered and paid for, but the contractor alleged they were nonconforming and required costly repairs, which the manufacturer refused to cover under warranty (paras 2-4).
Procedural History
- District Court of Bernalillo County: Granted partial summary judgment in favor of the manufacturer, ruling that its acknowledgment form constituted a counteroffer, and its warranty terms controlled the contract (para 5).
- Supreme Court of New Mexico (Interlocutory Appeal): Denied the contractor's application for interlocutory appeal of the partial summary judgment (para 5).
Parties' Submissions
- Appellant (Contractor): Argued that the manufacturer's acknowledgment form should be treated as an acceptance under Section 2-207(1) of the Uniform Commercial Code (UCC), not a counteroffer, and that the manufacturer breached the contract and warranties by delivering nonconforming goods and failing to provide warranty service (paras 6, 8).
- Appellee (Manufacturer): Contended that its acknowledgment form was a counteroffer, making its warranty terms controlling, and that the contractor accepted these terms by proceeding with the transaction (paras 6, 12).
Legal Issues
- Was the manufacturer's acknowledgment form a counteroffer or an acceptance under Section 2-207(1) of the UCC?
- If the acknowledgment form was an acceptance, which warranty terms govern the contract?
Disposition
- The Supreme Court of New Mexico remanded the case to the trial court for reconsideration of whether the acknowledgment form constituted a counteroffer or an acceptance under Section 2-207(1) of the UCC (para 21).
- If the acknowledgment form is found to be an acceptance, the conflicting warranty terms in the parties' forms are to be canceled, and the UCC's default warranty provisions will apply (para 33).
Reasons
Per Franchini J. (Baca J. and Serna J. concurring):
- The court analyzed Section 2-207 of the UCC, which modifies the common law "mirror image" rule to accommodate modern commercial practices. Under Section 2-207(1), a response to an offer can constitute an acceptance even if it includes additional or different terms, unless acceptance is expressly made conditional on the offeror's assent to those terms (paras 7-11).
- The manufacturer's acknowledgment form did not clearly and unequivocally communicate that acceptance was expressly conditional on the contractor's assent to its terms. The court adopted the reasoning in Dorton v. Collins & Aikman Corp., which focuses on whether the offeree's willingness to proceed was conditioned on the offeror's assent to additional terms (paras 16-17).
- The court emphasized the importance of considering the commercial context and the parties' reasonable expectations when determining whether a contract was formed (paras 18-20).
- If the acknowledgment form is deemed an acceptance, the court adopted the "knockout rule" from UCC Comment 6, under which conflicting terms in the parties' forms cancel each other out, leaving the UCC's default provisions to govern the contract. This approach avoids favoring either party and aligns with the UCC's principles of fairness and good faith (paras 30-32).