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Daitom, Inc. v. Pennwalt Corp. - 741 F.2d 1569 (10th Cir. 1984)

Rule:

The "knock-out" rule is the third approach for interpreting U.C.C. § 207 where the conflicting terms cancel one another. Under this view the offeree's form is treated only as an acceptance of the terms in the offeror's form which did not conflict. The ultimate contract, then, includes those non-conflicting terms and any other terms supplied by the Uniform Commercial Code, including terms incorporated by course of performance (§ 2-208), course of dealing (§ 1-205), usage of trade (§ 1-205), and other "gap fillers" or "off-the-rack" terms (e.g., implied warranty of fitness for particular purpose, § 2-315).

Facts:

Defendant Pennwalt Corporation ("Pennwalt") manufactured and sold certain machines and tendered to plaintiff Daitom, Inc. ("Daitom") a written offer for the sale of a number of those machines. The offer provided that any cause of action for any breach of warranty by Daitom was limited to one-year. Daitom's written acceptance of Pennwalt offer contained boilerplate language that reserved all of Daitom's rights and remedies with respect to warranties. When Daitom discovered defects with the machines, it initiated suit in federal district court for breach of warranty under U.C.C. § 2-207 and for negligent design and manufacture. Pennwalt filed a motion for summary judgment, with the district granted on all counts, holding that the one-year period of limitations barred Daitom's claims.

Issue:

Was the summary judgment on Daitom’s breach of warranty claims proper?

Answer:

No.

Conclusion:

The court affirmed in part and reversed and remanded in part the district court's judgment. The court ruled that because Daitom's acceptance contained different terms than Pennwalt's offer, the conflicting terms cancelled each other out, rendering the four-year statutory period, under U.C.C. 2-725(1), part of the contract. As such, Daitom could pursue its U.C.C. § 2-207 claims against Pennwalt. However, the district court correctly granted summary judgment against Daitom on its claims for negligent design and manufacture because there was no cause of action in tort for a purely economic loss.

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