Law School Case Brief
Reilly Foam Corp. v. Rubbermaid Corp. - 206 F. Supp. 2d 643 (E.D. Pa. 2002)
Under the knockout rule approach, terms of the contract include those upon which the parties agreed and gap fillers provided by the U.C.C. provisions. This approach recognizes the fundamental tenet behind 13 Pa. Cons. Stat. § 2207: to repudiate the "mirror-image" rule of the common law. One should not be able to dictate the terms of the contract merely because one sent the offer. Indeed, the knockout rule recognizes that merchants are frequently willing to proceed with a transaction even though all terms have not been assented to. It would be inequitable to lend greater force to one party's preferred terms than the other's. An approach other than the knock-out rule for conflicting terms would result in any offeror always prevailing on its terms solely because it sent the first form. That is not a desirable result, particularly when the parties have not negotiated for the challenged clause.
A dispute between Plaintiff Reilly Foam Corporation (Reilly Foam) and Defendant Rubbermaid Corporation (Rubbermaid) over a contract for sponges. Reilly Foam alleged that it contracted to supply Rubbermaid with its requirements for certain sponges for assembly into mops sold to Target stores. Reilly Foam alleged that rather than obtaining sponges solely from Reilly Foam, Rubbermaid continued to obtain sponges from another supplier and failed to make set minimum purchases. Rubbermaid denied that the contract created between the parties called for Reilly Foam to be its exclusive supplier.
Reilly Foam moved for partial summary judgment, contending the agreement and record demonstrate Rubbermaid's liability as a matter of law. Rubbermaid, in a cross-motion, argued that it had no obligation to directly purchase sponges, that Reilly Foam’s misrepresentation claims are barred by the economic loss and gist-of-the-action doctrines, and that its claims for promissory estoppel and restitution are pre-empted by the parties' contract. Reilly Foam argued that Pennsylvania law applied to all claims in the action.
Did Rubbermaid breach its contract in failing to make minimum annual purchases of other affected products as set forth in Reilly Foam’s price quote letter?
The court agreed that Article 2 of the Pennsylvania U.C.C. governed the sales contract at issue. The court found that a letter that offered price quotes by Reilly Foam contained sufficient detail and it was deemed an offer as a matter of law. A letter sent by Rubbermaid acted as an acceptance of the offer and the court held that it had to determine the terms of the agreement under 13 Pa. Const. Stat. § 2207, commonly known as the Battle of the Forms provision. Because the acceptance letter contained different information, the court had to determine whether the Pennsylvania Supreme Court would have adopted the knockout rule. The rule provided the cancellation of terms in both parties' documents that conflicted with one another. The court concluded that the Supreme Court would have adopted the rule and concluded that Rubbermaid breached its contract in failing to make minimum annual purchases of other affected products as set forth in Reilly Foam’s price quote letter. The court agreed that Reilly Foam’s claims for fraudulent or negligent misrepresentation were barred under the economic loss doctrine.
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