Lederle Laboratories manufactured DTP vaccine, and Corinthian Pharmaceutical Systems purchased vaccine for resale to physicians and other providers. After a 1984 dispute over an unfilled vaccine order, the parties settled. The settlement allowed Corinthian to order additional vaccine at the market price and under Lederle's terms and conditions in effect when the order was placed.
Lederle's price lists said they were not offers, that prices could change without notice, and that orders required acceptance at Lederle's home office. Its invoices likewise stated that sales were subject to Lederle's standard terms, including the seller's right to change prices before shipment and to allocate available product. Corinthian's president knew those terms appeared on Lederle's invoices, although he had not read them.
In May 1986, facing increased DTP product-liability exposure and insurance costs, Lederle raised its DTP price from $51 to $171 per vial. Corinthian learned of the impending increase on May 19 and used Lederle's telephone computer system to order 1,000 vials, confirming in writing that it sought a price of $64.32 per vial. The system supplied only a tracking number.
Lederle later shipped 50 vials at $64.32 per vial. Its accompanying letter called the shipment an exception to its normal pricing policy, said the remaining 950 vials would cost $171 each, and gave Corinthian the opportunity to cancel the balance. Corinthian accepted the 50 vials but sued for specific performance requiring delivery of the remaining 950 at the lower price. On Lederle's motion, the district court granted summary judgment for Lederle.
Issue #1
Whether Lederle's price lists, internal price letter, or customer letter constituted an offer to sell Corinthian 1,000 vials at the lower price.
Holding
No. Those communications were quotations or invitations for customers to make offers, not offers that Corinthian could accept by placing an order.
Reasoning
Under the U.C.C., an offer must objectively manifest a willingness to bargain such that the recipient's assent will conclude the deal. Lederle's price lists expressly stated that they were submitted without offer, could change without notice, and remained subject to Lederle's acceptance. Those qualifications made the lists price quotations rather than offers.
Lederle's internal price memorandum could not be an offer because Lederle did not intend customers, including Corinthian, to receive it. The customer letter announcing the price increase likewise did not offer to sell any stated quantity at the old price; it was a general quotation sent to customers. Neither communication gave Corinthian unilateral power to create a contract for 1,000—or any other number of—vials.
Because no earlier Lederle communication was an offer, Corinthian made the first offer when it placed and confirmed its May 19 order for 1,000 vials at $64.32 per vial.
Issue #2
Whether Lederle accepted Corinthian's offer for 1,000 vials at $64.32 per vial.
Holding
No. The Telgo tracking number was not an acceptance, and Lederle's later shipment of 50 vials was a seasonably disclosed accommodation and counteroffer rather than an acceptance.
Reasoning
The Telgo system's issuance of a tracking number merely acknowledged receipt and recorded Corinthian's order. This automated, ministerial act did not communicate Lederle's assent or otherwise manifest an intention to be bound to Corinthian's proposed transaction.
U.C.C. § 2-206 permits acceptance of an order for prompt shipment through a prompt promise to ship or through shipment of conforming or nonconforming goods. But a seller does not accept by shipping nonconforming goods if it seasonably notifies the buyer that the shipment is offered only as an accommodation.
Corinthian offered to buy 1,000 vials at the old price, while Lederle shipped only 50. The shipment therefore did not conform to Corinthian's requested quantity. Lederle's contemporaneous letter clearly explained that the 50 vials were an exception to its ordinary policy, that the rest would be priced at $171 per vial, and that Corinthian could reject that proposal by cancelling the balance.
That notice established that Lederle supplied the 50 low-priced vials as a favor, not because it accepted Corinthian's offer. The partial shipment was consequently a counteroffer: Corinthian could accept or reject Lederle's proposal under ordinary contract principles, but no contract arose requiring Lederle to supply the remaining 950 vials at $64.32.
Issue #3
Whether, assuming a contract had been formed, Lederle's standard terms would nevertheless permit its pricing and allocation position.
Holding
Yes. The parties' earlier settlement and Lederle's expressly conditional invoice terms made any contract subject to Lederle's price-change and allocation provisions.
Reasoning
The 1984 settlement provided that Corinthian's additional vaccine orders would be governed by Lederle's terms and conditions in force on the date of the order. Corinthian's president signed that settlement and was charged with knowledge of its contents. Lederle's standard terms consistently reserved the right to change prices before shipment and to allocate product without liability.
Lederle's invoice also expressly provided that acceptance was conditional on the buyer's assent to Lederle's terms and that Lederle rejected different or additional buyer terms. The court concluded that this language tracked U.C.C. § 2-207's protective mechanism and prevented Corinthian from imposing its demanded low price as a contrary term.
Thus, even if the facts could somehow support formation of a contract for the 1,000 vials, the contract would remain subject to Lederle's terms, which supplied independent price and allocation defenses.