Contracts I

Corinthian Pharmaceutical Systems, Inc. v. Lederle Laboratories

United States District Court for the Southern District of Indiana, Indianapolis Division, October 30, 1989

Facts:

Plaintiff ordered more than 6,000 vials of DTP from defendant, who refused to fill the order. The following lawsuit was settled by written agreement whereby defendant agreed to sell a specified amount of vaccine to plaintiff at specified times. Defendant fully performed this. One of the conditions was the plaintiff "may order additional vials . . . at market price . . . as of the date of the order." After the litigation, plaintiff continued to buy DTP from defendant and other sources.

Defendant periodically published price lists, but indicated therein that prices might have changed since the printing and that defendant could change the price at any time before shipment. Defendant's price lists, seller forms, and invoices also said that neither neither performance nor receipt of payment constituted an acceptance and that the seller would not be liable for failure to perform if the materials reasonably available to the seller were less than the needs of the buyer. Plaintiff admitted having knowledge of the conditions from the price lists and invoices.

Defendant then drastically raised the price of the vaccine from $51 to $171 per vial to cover the costs of self-insurance. They sent a letter announcing this price increase on May 20, 1986, but plaintiff somehow found out the day before and immediately placed an order for 1,000 vials. Plaintiff placed its order via defendant's telephone computer ordering system. The computer gave plaintiff a tracking number for its order, and plaintiff sent defendant two written confirmations on that day for the order at $64.32 per vial.

Defendant then sent plaintiff an invoice for 50 vials priced at the $64.32 per vials, but said that the remaining 950 would be priced at $171 and shipped in a couple weeks. Defendant offered plaintiff the option to cancel their remaining shipment if they so desired.

Issue:

LexisNexis IconWestLaw LogoGoogle Scholar LogoPage 609, III., Paragraph 1, Middle

The fundamental question is whether Lederle Labs agreed to sell Corinthian Pharmaceuticals 1,000 vials of DTP vaccine at $ 64.32 per vial.

Rules:

  • UCC § 2-206(b)

    An order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.

  • An accommodation is an arrangement or engagement made as a favor to another.

Reasoning:

  • Plaintiff made the offer of 1,000 vials at $64.32. Defendant's price lists were only invitations to make offers, and their internal price memos were internal, not directed at plaintiff.

  • Defendant did not communicate an acceptance. When plaintiff placed its order, it received only an automated tracking number, which cannot constitute an acceptance.

  • Defendant indicated that they did not accept plaintiff's offer and offered the 50 vials only as an accommodation.

  • Even if a contract was formed, defendant clearly communicated that the prices remained subject to change at any time, so defendant could have increased the price anyway.

Holding:

Defendant did not agree to sell plaintiff 1,000 vials at $64.32 per vial. Summary judgment granted for defendant.

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