Union Carbide Corp. v. Oscar Mayer Foods Corp.

947 F.2d 1333 (7th Cir. 1991)

 

RULE:

The doctrine of material alteration is an aid to contract interpretation rather than an ironclad rule. Even if the alteration is material, the other party can decide to accept it. Consent can be inferred from other things besides the unsurprising character of the new term; even from silence, in the face of a course of dealings that makes it reasonable for the other party to infer consent from a failure to object.

FACTS:

Appellant taxpayer corporation filed a diversity action against appellee customer corporation for breach of contract to recover sales tax it paid on products it had sold to appellee. Appellant claimed that appellee agreed to indemnify it for all sales tax liability. Appellant appealed the district court’s order granting summary judgment for appellee. The appellate court affirmed the district court's order granting summary judgment for appellee.

ISSUE:

Did appellee customer corporation agree to indemnify appellant taxpayer corporation for all sales tax liability based on the following provision printed on the back of appellant’s invoices, which stated that “In addition to the purchase price, Buyer shall pay Seller the amount of all governmental taxes . . . that Seller may be required to pay with respect to the production, sale or transportation of any materials delivered hereunder”?

ANSWER:

No.

CONCLUSION:

Appellant taxpayer corporation’s misreading of the contract was clear enough to have been determined without a trial. There was no breach of contract because the indemnity clause on the back of the invoice was a material alteration in the parties' contract and was therefore unenforceable where the clause was ambiguous and appellee's consent could not be realistically inferred by its silence in the face of a succession of invoices containing the new term. Accordingly, there was no breach of contract.

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