Common Law v. U.C.C. Case

http://www.lawnix.com/cases/princess-cruises-ge.html

Princess Cruises, Inc. v. General Electric Co., 143 F.3d 828 (4th Cir. 1998).

Facts: Princess Cruises (P) sought to schedule routine inspection and repair for the SS Sky Princess with General Electric, the original manufacturer of the ship’s engines. Princess issued a purchase order with a proposed price and a brief description of the required services. The reverse side of the purchase order listed terms and conditions stating that Princess considered the purchase order to be an offer.

GE received the order and answered by faxing a fixed price quote to Princess. It was more detailed than Princess’ order and included a parts and materials list, a work description, and an offering price of $231,925 with GE’s terms and conditions. GE rejected Princess’ terms and limited its liability on claims to the contract price and disclaimed any consequential damages, lost profits, or lost revenue.

Princess gave GE permission to proceed. Problems later arose due to rust on a rotor which needed to be rebalanced after cleaning. Delays caused the cancellation of a cruise and Princess alleged that continued vibration and high temperatures caused damage to the ship and added expenses for additional repairs.

Princes sued General Electric for breach of contract, breach of express warranty, breach of implied warranty, and negligence. GE was awarded summary judgment on the negligence claim. The trial court judge denied GE’s motion for judgment as a matter of law at the close of trial and instructed the jury on UCC 2-207. Princess was awarded $4,577,743 and GE’s motion for judgment as a matter of law was again denied. GE appealed.

Issues: 1) May a trial court apply UCC principles and concepts to a maritime service contract without any inquiry into the nature of the contract? 2) Must a court examine the facts to determine the predominant nature of a mixed contract before it can determine whether the UCC or the common law applies?

Holding and Rule: 1) No. A trial court may not apply UCC principles and concepts to a maritime service contract without any inquiry into the nature of the contract. 2) Yes. A court must examine the facts to determine the predominant nature of a mixed contract before it can determine if the UCC or the common law applies.

There is a principle in admiralty law that courts should adopt rules that accord with standard commercial practice. In standard commercial practice, a transaction must be predominantly for the sale of goods before the UCC applies. We are not persuaded that UCC 2-207 applies to maritime transactions regardless of their nature.

Mixed contracts: A court must first determine whether the predominant purpose of the transaction is the sale of goods. The test for inclusion or exclusion is not whether the contract is mixed but whether the predominant factor is the rendition of service with goods incidentally involved. The court must look to the language of the contract, the nature of the business of the supplier, and the intrinsic worth of the materials.

In this case there is no doubt that this was a service contract. Even though certain parts were to be supplied they were incidental to the predominant purpose of service. The contract was performed by the GE Installation and Service Engineer Division, which is comprised of engineers who do service work.

We adopt the rule followed by the majority of the states and refer to common law principles when assessing contracts predominantly for services. An acceptance that varies the terms of the offer is a counteroffer which rejects the original offer. GE’s Final Price Quotation was a counteroffer rejecting Princess’ PO. Princess accepted that offer and its terms by giving GE permission to proceed. Princess by its actions assented to the terms and conditions in GE’s Final Price Quotation offer. Such intent is determined from the outward objective manifestations of the acts and statements of the party.

GE’s terms constitute the contract between the parties. The verdict must therefore be reversed and remanded as the contract limited damages to a maximum of $231,925.

Disposition: Reversed and Remanded.