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Case Brief
Date: 3 December 2001
Plaintiff: NORTHROP CORPORATION Defendant: LITRONIC INDUSTRIES
(In the Matter of Northrop Corporation vs Litronic Industries) Court: States Court of Appeals, Seventh Circuit.
Facts
1. The plaintiff company is Northrop and defendant side is Litronic, which manufactures electronic components, including \weapon systems.
2. In 1987 Northrop sent a request to several manufacturers, including Litronic, that submit offers to sell Northrop a customized printed wire board designated by Northrop as a \purchase order that would set forth terms and conditions that would override any inconsistent terms in the offer.
3. In response, Litronic mailed an offer to Northrop that included 90 day warranty to sell 4 boards, 19000$ each, to be delivered within six weeks and provided that the terms of the offer would take precedence over any terms proposed by the buyer. Also Northrop’s order form provided for a warranty that contained no time limit
4. A month later, Lynch, Northrop’s purchasing officer, authorized Litronic to begin the production in a phone conversation with a turn on letter and that a purchase order would follow. The purchase order for all four boards required the seller to send a written acknowledgement to Northrop. Because of Litronic was familiar with Northrop's purchase order form, so having previously done business with Litronic never did so and Northrop did not complain.
5. Although Litronic had begun manufacturing immediately after the phone call, they did not deliver the first three boards until more than a year later, in July of 1988.
6. The testing of the boards for conformity from Northrop to its speculations was protracted because of those boards were highly complex or inspectors were busy. Northrop returned the three boards five or six months after delivery claiming that they were defective.
7. Litronic refused to accept the return, on the ground that its 90 day warranty has expired. Northrop's position is that it had an unlimited warranty, as stated in the purchase order.
Actions in the court:
? Lower court rendered judgment in favor of “Northrop Corp.” ? Court of Appeals affirmed
? Northrop’s response contains different, but not additional terms.
? It was considered that six months was a reasonable time to return the boards due to the nature of the industry.
? Rejected the sensible option from trying to determine if the new terms in the offer from (Northrop) are materially different from the original offer.
? It is obvious that both sides did not agree with the warranty since “Northrop” sent back
purchase order with a no time limit warranty clause.-
Issue
Whether Nothrop Co. waited more than the “reasonable time”, does the dispute is over and does the UCC allows the buyer of nonconforming goods to reject them? (Different terms versus additional terms in UCC) Rule
The presence of different terms in the acceptance suggests that the offeree didn’t clearly agreed the offeror’s terms, yet both parties contracted with each other. Holding: None. Reasoning
As UCC does not clearly say that what the terms of the contract are if the offer and acceptance contain different terms, in this problem, the majority view is that the
discrepant terms fall out and replaced by suitable UCC gap filler. The judge followed this approach and proceeded to section 2-309, which provides that nonconforming goods may be rejected within a reasonable time.
6 months was a reasonable time to due to the complexity of the boards. (However, in the given case, it was written that “pursuant to the majority understanding of UCC Sec. 2-207(2)) a warranty of \a 90-day warranty reasonable, Litronic was free to argue for that in the district court.” Both sides did not express approval to the “different” terms laid out by Northrop shows that they didn’t agree to the offeror’s (Litronic’s) terms, because they put unlimited terms on warranty.
They conducted business with each other anyways. If offer does not want to conduct
business, he or she would have specified that the Northcop must conform to all aspects of the deal.
[According to the majority view, the purchase order has no significance diffebeyond showing that Northrop's acceptance contained (albeit by reference) rent terms, given the fact that Litronic never signed the order, and the fact that Northrop never called this omission to Litronic's attention.]
However, leading minority view was that the discrepant terms in the acceptance are to be ignored. In regard as “different” to “additional”, the terms in the offer prevail over the different terms in the acceptance only if the latter are materially different. But at the time, had yet been adopted by only one state. As written in the case ”Under given above view, as under what we are calling the leading minority view, the warranty in Litronic’s offer, the 90 day warranty, was the contractual warranty, because the unlimited warranty contained in Northrop’s acceptance was materially different”.
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