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Law School Case Brief

J.D. Fields & Co. v. United States Steel Int'l, Inc. - 690 F. Supp. 2d 487 (S.D. Tex. 2009)

Rule:

Typically, a price quotation is considered an invitation for an offer, rather than an offer to form a binding contract. Price quotations are a daily part of commerce by which products are shopped and commercial transactions initiated. Without more, they amount to an invitation to enter into negotiations, but generally they are not offers that can be accepted to form binding contracts. It would bring an end to the competitive practice of shopping products if every quotation exposed the quoter to an enforceable contract on whatever terms the quotee chose, regardless of product availability. Typically, a seller's price quotation is an invitation for an offer, and the offer usually takes the form of a purchase order, providing product choice, quantity, price, and terms of delivery. Following the general rule that a price quotation is an invitation to make an offer, the purchase order usually is the first document having the legal attributes of an offer.

Facts:

Plaintiff buyer brought an action against defendant seller alleging breach of contract, promissory estoppel, and fraud with regard to two transactions involving the sale of steel pipe. The seller filed a counterclaim against the buyer alleging breach of contract with regard to a third transaction involving the sale of steel pipe. Products previously had been shipped after the seller gave a price quotation, the buyer sent a purchase order, and the seller acknowledged the order. The seller declined to accept two purchase orders, one of which was for a quantity less than the price quotation had specified. The buyer did not pay for a third order that was shipped pursuant to an order acknowledgment with an increased price. 

Issue:

(a) Was there a contract formed as to the two declined orders?; (b) Was there a contract formed as to the third order?

Answer:

(a) No; (b) Yes

Conclusion:

The court held that no contract was formed under Tex. Bus. & Com. Code Ann. §§ 2.204(a)2.206(a)(2) as to the two declined orders because the price quotations were not firm offers but were merely invitations to offer. Industry custom and course of dealing, considered pursuant to Tex. Bus. & Com. Code Ann. § 1.303(b)(c), showed that order acknowledgments were an essential part of the contract process. There are exceptions to the general rule that a price quotation is not an offer. A price quotation, if detailed enough, can constitute an offer capable of acceptance.  For a price quotation to create a binding offer, however, it must reasonably appear from the price quote that assent to the quote is all that is needed to ripen the offer into a contract. A price quote that is subject to the seller's confirmation is not an offer because the buyer's assent will not consummate the contract. The promissory estoppel and fraud claims failed for lack of reasonable reliance on the price quotations; As to the third order, acceptance of the goods shipped under the third order obligated the buyer under Tex. Bus. & Com. Code Ann. § 2.607(a) to pay, but a fact question existed as to objection under Tex. Bus. & Com. Code Ann. § 2.207(b) to the increased price.

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