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Keywords

contractdamagescorporation

contractplaintiffdamagescorporation

Related Cases

Dale R. Horning Co., Inc. v. Falconer Glass Industries, Inc., 730 F.Supp. 962, 11 UCC Rep.Serv.2d 536

Facts

AGM, an Indiana corporation, was subcontracted to install glass for a construction project and ordered ceramic-backed glass from Falconer. The order was confirmed without any discussion of warranty limitations. Falconer delivered defective glass, causing delays and additional costs for AGM, which attempted to hold Falconer responsible for these extra expenses. Despite the industry norm of including restrictive terms in contracts, AGM was unaware of Falconer's fine print that excluded consequential damages.

Plaintiff Architectural Glass & Metal Company (“AGM”) is an Indiana corporation engaged in the business of installing and glazing commercial glass products. During the summer of 1986, AGM was a subcontractor on the Finance Federal Credit Union construction project in Indianapolis.

Issue

Whether Falconer's limitation of consequential damages constituted a material alteration of the contract under the Uniform Commercial Code.

As this Court discussed at length in an earlier opinion, a key issue in this case is whether Falconer's limitation of consequential damages contained on its standard form is a term of the parties' contract under the Code.

Rule

Under U.C.C. § 2-207, additional or different terms become part of a contract unless they materially alter the agreement, which is determined by whether their incorporation would result in surprise or hardship to the other party.

Section 2–207(2) provides that where, as here, both parties are merchants, such terms become part of the contract unless they materially alter the prior agreement.

Analysis

The court found that Falconer's attempt to limit consequential damages was a material alteration of the contract because it would impose substantial economic hardship on AGM, who had a right to expect recovery for consequential damages due to the supplier's knowledge of AGM's particular needs. The court emphasized that the limitation was not negotiated and was hidden in fine print, which AGM did not read or understand.

Applying this mixed subjective-objective standard, the Court finds that even though the subcontractor expects accountability as among other subcontractors, it should anticipate and even expect suppliers to attempt to exclude consequential damages.

Conclusion

The court ruled in favor of AGM, awarding $12,303.17 in consequential damages while denying the request for prejudgment interest, concluding that the limitation of consequential damages was not part of the contract.

Judgment for the plaintiff shall be entered accordingly.

Who won?

Architectural Glass & Metal Company (AGM) prevailed because the court determined that Falconer's exclusion of consequential damages was a material alteration of the contract, and AGM was entitled to recover for the additional costs incurred due to the defective glass.

AGM has thus proven that it is entitled to recover consequential damages caused by Falconer's defective product.

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