Opinion ID: 692023
Heading Depth: 2
Heading Rank: 3

Heading: Materiality of the Time-Bar Provision

Text: 22 The POA that Phillips sent to Shur-Value contained standard terms and conditions of sale, including a requirement that actions for breach of contract be brought within one year of the alleged breach. Because it is undisputed that the parties had never discussed any limitations period during the Chicago Trade Show or during Shur-Value's telephone order of K-Resin, Phillips' inclusion of a time-bar provision constituted an additional term as between merchants 6 and was thus governed by Tex.Bus. & Com.Code Ann. Sec. 2.207 (West 1994). Section 2:207 provides that: 23 (a) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms. 24 (b) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: 25 (1) the offer expressly limits acceptance to the terms of the offer; 26 (2) they materially alter it; or 27 (3) notification of objection to them has already been given or is given within a reasonable time after notice of them is received. 28 Id. Because Shur-Value's November 15th offer did not expressly limit acceptance to the terms of the offer and because Shur-Value never objected to the inclusion of the time-bar provision, the only provision that concerns us here is (b)(2), the material alteration provision. If, as the district court held, the additional one-year limitations period did not materially alter the contract as a matter of law, Shur-Value's claims would be time-barred. On the other hand, if, as Shur-Value contends, disputed factual questions determine whether a one-year limitations period materially alters a contract, we would have to vacate the district court's summary judgment order and remand for trial. 7 29 The commentary to Section 2.207 provides some useful clues as to what would or would not materially alter a contract. According to Official Comment 4, clauses which would normally materially alter a contract, and thus result in surprise or hardship, include clauses requiring that complaints be made in a time materially shorter than customary or reasonable. Conversely, Official Comment 5 provides examples of clauses which involve no element of unreasonable surprise and hardship, including a clause fixing a reasonable time for complaints within customary limits. Taken together, Official Comments 4 and 5 suggest that a line divides time-bar provisions into two spheres. In one sphere reside limitation periods that are acceptable and accepted; in the other, limitation periods that are unacceptable and unaccepted. The question at issue here, however, is who should draw the line. 30 In Texas, the state legislature draws the line. Texas law provides that actions for breaches of sales contracts be filed within four years of the cause of action accruing, but it also provides that parties may, by original agreement, shorten the period of limitations to not less than one year. Tex.Bus. & Com.Code Ann. Sec. 2.725(a) (West 1994). Because states, like Texas, usually stipulate which statute of limitations period applies to a given cause of action, statutes of limitations are distinctly legal creations, the parameters of which have been predetermined based on a myriad of policy and equity considerations. If a contractual provision stipulates a limitations period that falls within statutorily defined parameters (or, as we have labeled them, spheres), then presumably the provision is not only legal, but also reasonable and customary, acceptable and accepted. Thus, because Phillips' POA provides for a one-year limitations period and Texas allows the shortening of a period of limitations to not less than one year, Phillips' POA seemingly constitutes a clause fixing a reasonable time for complaints within customary limits. Sec. 2.207 cmt. 5. Cf. Aceros Industriales, S.A. de C.V. v. Florida Steel Corp., 528 F.Supp. 1156, 1158 (S.D.N.Y.1982) (interpreting New York's identical UCC provisions and concluding that fixing a one-year limitation on bringing complaints does not, as a matter of law, constitute a material alteration of prior oral agreement, in light of Sec. 2:725); Therma-Coustics Mfg. Inc. v. Borden Inc., 167 Cal.App.3d 282, 213 Cal.Rptr. 611, 619-20 (1985) (same, but interpreting California's UCC provisions). 31 The cases that have analyzed whether a time-bar addition to a contract constitutes a material alteration treats the issue as a question of law. Notwithstanding this wealth of precedent, Shur-Value contends that the issue of whether the time period of one year is reasonable represents an issue of fact and not law. In support of its position, Shur-Value resorts to arguing by analogy, assessing the way courts have treated contractual additions that limit a contracting party's remedies. 32 According to Official Comment 5 of Sec. 2.207, a clause limiting remedy in a reasonable manner involves no element of unreasonable surprise and thus should be incorporated into the contract. Similar language applies to time-bar restrictions. However, unlike the courts' handling of time-bar restrictions, courts have consistently held that it is a question of fact whether a remedies limitation constitutes a material alteration. 8 Shur-Value thus concludes that determining whether a one-year limitations period constitutes a material alteration must also be a question of fact. We disagree. 33 While the Texas Code explicitly condones the inclusion of a limitation of remedies clause, see Tex.Bus. & Com.Code Ann. Sec. 2.719, the code leaves open the issue of what constitutes a reasonable limitation. 9 Therefore, determining the reasonableness of limitations on remedies requires a distinctly case and fact specific inquiry. The reasonableness of time-bar provisions, on the other hand, transcends the facts of any one particular case. Texas' UCC provision, Sec. 2.725, expressly permits a one-year limitations period in contracts for the sale of goods. As to any sales contract between merchants governed by Texas law, a one-year time-bar restriction is per se statutorily acceptable. Thus, unlike the analysis required in evaluating remedies limitations, we need not analyze the particular factual circumstances surrounding the POA addition at issue here. 34 Even accepting the reasonableness of the one-year limitations period, Shur-Value still maintains that a factual inquiry is required. Specifically, Shur-Value contends that in determining whether an additional term to a contract constitutes a material alteration, the court still must make the factually intensive determination of whether the term will result in surprise or hardship to the affected parties. See American Ins. Co. v. El Paso Pipe & Supply Co., 978 F.2d 1185, 1190 (10th Cir.1992). Shur-Value argues that the district court has not, and could not have, performed this analysis because this type of analysis requires the consideration of disputed factual issues, more appropriately left to the jury and not to the trial judge on a summary judgment motion. 35 We do not dispute Shur-Value's characterization of the material alteration test. Considerations of surprise and hardship must remain a part of the analysis. In this case, however, these considerations have already been taken into account by the Texas legislature, by the district court and by this court. Again, Texas' UCC provision, Sec. 2.725, expressly allows for a one-year time-bar in contract actions. Because the avowed purpose of Sec. 2.725 is to introduce a uniform statute of limitations for sales contracts, we must assume that the Texas legislature's allowance of a one-year limitations period comports with this purpose and thus mirrors the reasonable customs of the state. Therefore, as Official Comments 4 and 5 to Sec. 2.207 make perfectly clear, a limitations clause deemed reasonable and customary (as this one must be) involves, by definition, no element of unreasonable surprise or hardship. In sum, because our calculus has implicitly determined that the time-bar limitations addition results in no surprise or hardship to the parties, we need not engage in the type of separate analysis urged by plaintiff. 36 We do not stand alone in our interpretation of Texas law. Other courts of appeals have treated a material alteration issue as a question of law. In Permian Petroleum Co. v. Petroleos Mexicanos, 934 F.2d 635 (5th Cir.1991), for instance, the Fifth Circuit decided that, as a matter of Texas law, a term providing for interest on overdue invoices did not materially alter the contract. Id. at 654. Of course, not all material alteration issues are necessarily legal in nature. In some instances the question whether an additional term in a written confirmation constitutes a 'material alteration' is a question of fact to be resolved by the circumstances of each particular case. N & D Fashions, Inc. v. DHJ Industries, Inc., 548 F.2d 722, 726 (8th Cir.1976). In this case, however, the per se reasonableness of the POA's one-year time-bar entitles Phillips to judgment as a matter of law. Cf. Dale R. Horning Co., Inc. v. Falconer Glass Industries, Inc., 710 F.Supp. 693, 698 n. 6 (S.D.Ind.1989) (noting that even though many cases state that the question of material alteration is a question of fact, there are instances in which the question is treated as one of law).IV. CONCLUSION 37 Accordingly, we affirm.