Legal Memorandum: Additional Terms in Contract Acceptance

Issue: Under the laws of Massachusetts, does a clause become part of the contract where there is no objection to it by the buyer and the clause did not constitute a material alteration of the contract?

Mass. Gen. Laws ch. 106, § 2-207, addresses the issue of additional terms in contract acceptance or confirmation and there is case law that holds that damage limitation clauses are "material alterations" of the contract under § 2-207(2) and thus do not become part of the contract.  See Winter Panel Corp. v. Reichhold Chems., Inc., 823 F. Supp. 963, 971 (D. Mass. 1993).

In Winter Panel, the plaintiff entered into a contract with defendant Reichhold for the supply of chemical foam used to produce insulated construction panels.  The foam was shipped pursuant to purchase orders from Winter Panel.  The defendant mailed invoices the day of each shipment and sent technical bulletins to Winter Panel.  The invoices contained language limiting Reichhold’s liability for damages in the event of a breach.

The chemical foam proved unsatisfactory and Winter Panel sued for breach of contract, breach of warranty and misrepresentation.  Reichhold argued that pursuant to § 2-207, the damage limitation clauses had become part of the contract because Winter Panel did not object to the additional contract terms and the terms did not constitute a material alteration of contract.

After analyzing the case law on the issue, the court held that damage limitation clauses are too potentially burdensome not to be considered material.  Id.  When consequential damages are available to a buyer under U.C.C. § 2-715, a clause limiting such damages shifts the risk of substantial commercial loss to the buyer.  Id.  Even though these allocations of risk occur […]