Opinion ID: 1174086
Heading Depth: 1
Heading Rank: 3

Heading: rangen's cross appeal.

Text: This action involves the sale of goods as defined in I.C. § 28-2-105 so it is within the scope of the Uniform Commercial Code, codified as I.C. §§ 28-1-101 et seq. Section 28-2-204, dealing with formation in general provides that [a] contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract. Section 28-2-206, dealing with offer and acceptance in formation of contract, provides, (1) Unless otherwise unambiguously indicated by the language or circumstances (a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances; (b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods, but such a shipment of nonconforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer. The facts disclose that when Valley Trout required fish food it would send a purchase order to Rangen. Rangen would reply by shipping the feed and including an invoice which was signed by one of Valley Trout's employees acknowledging receipt of the fish food. Under the Uniform Commercial Code, Valley Trout's purchase order is an offer to purchase which was accepted when Rangen shipped the feed, supra. By the conduct of the parties a series of contracts were formed. This is not a requirements contract under I.C. § 28-2-306, as contended by Rangen. Although Rangen was the primary supplier of fish food to Valley Trout the record does not show that it was Valley Trout's exclusive supplier. Here each purchase order constituted a separate contract. The terms of contracts which contain additional terms in the acceptance are governed by I.C. § 28-2-207 which reads: Additional terms in acceptance or confirmation.  (1) 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. (2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer; (b) they materially alter it; or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received. (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this act. Under the provisions of I.C. §§ 28-2-204, 28-2-206 and 28-2-207(1), Rangen's shipments of the food was an acceptance of the purchase orders. The invoice accompanying the shipment from Rangen provided an additional term, beyond that contained in the purchase order, the late charge. Under § 28-2-207(1) the shipment acted as an acceptance because 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... . [3] Whether the additional term becomes part of the contract is determined by I.C. § 28-2-207(2). There is no question that Rangen and Valley Trout are merchants within the meaning of I.C. § 28-2-104 and therefore the additional terms become part of the contract unless one of the enumerated exceptions (§ 28-2-207(2)(a), (b) and (c) supra ) is present. The trial court decided the issue under subsection (b). There is no language in Valley Trout's purchase orders which indicate that the offers were expressly limited to their terms, therefore subsection (a) is inapplicable. The president of Valley Trout testified that he was aware that a finance charge was being assessed on the account for late payments and yet no written objection was made to these charges until after this action was instituted by Rangen to collect on the account. Valley Trout had adequate notice of the late charge. Consequently, as between merchants, the additional term will become part of a contract unless it materially alters the contract or notification has been given or is given within a reasonable time. The trial court concluded that this additional term was a material alteration of the contract. However, it is our interpretation that the trial court erred in its application of I.C. § 28-2-207(2)(b) and therefore we reverse the judgment in this regard. The trial court compared the amount of interest Rangen would have received if the term did not become part of the contract, and the interest Rangen would receive if the term were incorporated. The former figure was $1,400 and the latter amounted to approximately $27,000. The court therefore concluded that this was a material alteration in anyone's view. This view might seem logical except for comment 5 to I.C. § 28-2-207 which provides, Examples of clauses which involve no element of unreasonable surprise and which therefore are to be incorporated in the contract unless notice of objection is seasonably given are ... a clause providing for interest on overdue invoices or fixing the seller's standard credit terms where they are within the range of trade practice and do not limit any credit bargained for. ... (Emphasis added.) It is the view of the drafters of the code that this type of term, which adds a finance charge for past due accounts, is not a material alteration under the code. Courts of other jurisdictions which have dealt with this issue are in accord. Tim Hennigan Co., Inc. v. Nunes, Inc., 437 A.2d 1355 (R.I. 1981); F.D. McKendall Lumber Co. v. Kalian, 425 A.2d 515 (R.I. 1981); Interlake Inc. v. Kansas Power & Light Co., 7 Kan. App.2d 16, 637 P.2d 464, 465 (1981); Cf. Loizeaux Bldrs. Supply Co. v. Donald B. Ludwig Co., 144 N.J. Super. 556, 366 A.2d 721 (1976) (where the service charge term was in fine print on the bottom of the monthly summary statements and not on the invoices. The court did consider other terms appearing on the invoices to be part of the contract.) School Dist. of Springfield v. Transamerica Co., 633 S.W.2d 238 (Mo. App. 1982) (recognizing that this is not a material alteration under the code, but requiring unequivocal notice that the charge would be imposed). It is our conclusion that the additional provision in the invoice was not a material alteration of the contract within the meaning of the code. While the term becomes part of the contract by operation of law under § 28-2-207, it does not necessarily follow that the term will be enforceable. If the term is unconscionable or unreasonable, it will be unenforceable under other provisions of the code. The Comment to the official text of I.C. § 28-2-207 contains a cross reference to I.C. § 28-2-718, indicating that the purpose of § 28-2-207 is to include the liquidated damage term automatically in a contract and that the purpose of § 28-2-718 is only to judge the enforceability of the liquidated damage term once it is found to be part of the contract. Section 28-2-718 states, in pertinent part: Liquidation or limitation of damages  Deposits.  (1) Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty. The 1% and 1 1/2% per month service charges are reasonable in light of the anticipated or actual harm caused by the breach, when there may be difficulties of proof of loss and it may be inconvenient or nonfeasible to obtain an adequate remedy. Section 28-2-718 specifically states that unreasonably large liquidated damages are void as a penalty thereby limiting the amount of the service charge and preventing undue hardship. Additionally, the damages provided for by contract are limited by § 28-1-102(3) which provides, [t]he effect of provisions of this act may be varied by agreement, except as otherwise provided in this act and except that the obligations of good faith, diligence, reasonableness and care prescribed by this act may not be disclaimed by agreement ... Consequently, parties are always required to deal in good faith and contract interpretation under the code will include the consideration of reasonableness. Section 28-1-106, dealing with remedies is also relevant to the instant case. It states, [t]he remedies provided by this act shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or special nor penal damages may be had except as specifically provided in this act or by other rule of law. Valley Trout asserts that the trial court found that it had objected to the additional term. The finding in its entirety reads: 7 During the summer of 1977 the defendant advised the plaintiff that the `late charges' referred to in Finding 7 [sic] was not a part of their `agreement,' that the P.C.A., defendant's banker, would not consider `late charges' in its financing arrangements with the defendant. However, the defendant continued to order fish food, and the plaintiff continued to deliver fish food as set forth in Finding 4, and the plaintiff debited defendant's accounts with `late charges' as plaintiff stated in Finding 7.  The conclusions of law do not refer to this finding other than that the findings do not support the conclusion that there was an express contract for the imposition of late charges. Implicit from the court's finding of fact is that Valley Trout waived its objection to the term by continuing to order and receive fish food. Valley Trout continued to be charged with the late charge but no other objection was forthcoming until after suit was filed by Rangen. The case law does not address what is sufficient notice of objection under this section of the code. The cases dealing with the issue have involved written notice. Valley Trout relies on S.C. Gray v. Ford Motor Co., 92 Mich. App. 789, 286 N.W.2d 34 (1979), as support for its position that oral notice is sufficient. In that case, however, the oral notification was followed by written objection within six days. Assuming, without deciding, that the oral notification was sufficient, a question remains whether that notification is effective forever and whether it may be waived either by conduct or by words. The code should be read as a whole to effectuate its policies. I.C. § 28-1-103 provides that the common law is not abrogated by the code and reads as follows: 28-1-103. Supplementary general principles of law applicable.  Unless displaced by the particular provisions of this act, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provisions. Therefore, the principles of waiver and estoppel may still be considered in a commercial transaction. In Brand S. Corp. v. King Logging Co., 102 Idaho 731, 639 P.2d 429 (1981), we stated that waiver is the voluntary, intentional relinquishment of a known right, or advantage, and does not necessarily depend on any new consideration; it must appear, however, that an adversary party has acted in reliance upon such a waiver and altered his position. Valley Trout's actions in continuing to order and pay for feed constituted a waiver of their right to object to the additional term. Valley Trout also paid the finance charge on one occasion after July, 1977. This conclusion is supported by the trial court's finding that Valley Trout continued to order fish food. The testimony by Mr. Ellis, Valley Trout's president, further supports this conclusion. We quote from his testimony: Q. Subsequent to July 1st, 1977, did you have any meetings with Thorleif Rangen to discuss the imposition of the one percent finance charge? A. I did not think we were going to have the one percent. And some time after August 25 I spoke again with someone from Rangen's that came to the office. I believe it was Jeff Arnold. Could have been Gary Whitwell. And I also spoke with Mr. Rangen in his office, but I didn't think that was an imposition that we had agreed not to pay. And  but he did not agree at that time that we were not going to pay it. He left it on the account. Q. Okay. And didn't you, in fact, instruct Mr. Jerry Hawkins to pay the late charge that Rangen, Inc., imposed on that account? A. Yes. Q. And that was subsequent to the July 1977 Billing; is that correct? A. I think it was subsequent to the August. I don't think we were billed in July  a late charged in July. I'm not sure, but I don't think so. .... Q. Did you have any conversations with Rangen employees or Mr. Rangen himself after July 1, 1977, concerning the fact that you were being charged finance charges on your monthly billings that you had received from them? A. Yes. Q. And who did you have conversations with? A. With Mr. Rangen and with Mr. Whitwell. Q. And when did you have a conversation with Mr. Rangen? A. It would have been after August 25th. Somewhere around in September. Q. Of '77? A. It would have been of '77. Q. Can you tell the Court what the nature of that conversation was? A. Just that I did not feel that it was part of the agreement, that we never came to any terms on interest. Q. What did Mr. Rangen say? A. He said that we would be charged interest, and we were charged interest. Q. Did you after that time keep paying on your account? A. Yes. Q. Did you keep purchasing the feed from Rangen's? A. Yes. Q. Why did you do that? A. In the fall of '77 you mean? Q. Yes. A. You have to feed the fish. There is only one place to get the fish feed in the valley. .... Q. But you were told by Mr. Rangen that in fact the late charge would be at the rate of one percent per month; were you not? A. No. He just said you have to pay the finance charges. He didn't say the amount. I don't recall him ever saying the amounts. ... . Q. Okay. But after Mr. Rangen told you that the finance charge would be imposed on your account in August or thereabouts, August of 1977, isn't it true that you ordered several hundred pounds of fish feed after that date? A. Yes. Q. And is it not true that you instructed your bookkeeper at that time to pay the finance charge that was being imposed by Rangen, Inc.? A. Yes, I did. .... Q. But they did know that it was being imposed? A. Interest rate, yes. They did know it was being imposed. Q. And did you know it was being imposed? A. Yes. Q. And you continued to buy the feed? A. That's right. Q. And continued to feed the fish? .... Q. Now, going back to page 36, line 17, I asked the question [referring to Mr. Ellis' deposition]: `Q. Well, is it your understanding then that you would have to  that you would have continued to pay one percent per month up until the time that you built your own feed mill? `A. It was my intention that my fish had to be fed and the only way I could feed them was to pay the one percent.' The record contains ample evidence that Valley Trout intended to waive its right to object to the term. Valley Trout was aware that the interest rate was being charged and that Rangen would refuse to sell to it unless it agreed with those terms. The trial court's finding no. 7 is supported by substantial and competent evidence and will not be disturbed on appeal. From that finding and review of the record before this court, it can only logically be concluded that Valley Trout waived its previous objection to the late charges. The record also indicates that Rangen was borrowing money at a rate of 1% above prime because of delinquent accounts. Rangen continued to sell to Valley Trout relying to its detriment on Valley Trout's acquiescence. By continuing to order and accept the fish food Valley Trout waived its objection to the additional term, the imposition of the late charge. It is to be recalled that the code is to be construed as a whole to effectuate its purposes and policies. I.C. § 28-1-201, supra. Section 28-1-205 provides: 28-1-205. Course of dealing and usage of trade.  (1) A course of dealing is a sequence of previous conduct between the parties to a particular transaction which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct. (2) A usage of trade is any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage are to be proved as facts. If it is established that such a usage is embodied in a written trade code or similar writing the interpretation of the writing is for the court. (3) A course of dealing between parties and any usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware give particular meaning to and supplement or qualify terms of an agreement. (4) The express terms of an agreement and an applicable course of dealing or usage of trade shall be construed wherever reasonable as consistent with each other; but when such construction is unreasonable express terms control both course of dealing and usage of trade and course of dealing controls usage of trade. .... 28-2-208 provides: 28-2-208. Course of performance or practical construction.  (1) Where the contract for sale involves repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other, any course of performance accepted or acquiesced in without objection shall be relevant to determine the meaning of the agreement. (2) The express terms of the agreement with any such course of performance, as well as any course of dealing and usage of trade, shall be construed whenever reasonable as consistent with each other; but when such construction is unreasonable, express terms shall control course of performance and course of performance shall control both course of dealing and usage of trade (section 28-1-205). (3) Subject to the provisions of the next section on modification and waiver, such course of performance shall be relevant to show a waiver or modification of any term inconsistent with such course of performance. Under I.C. § 28-2-208, Valley Trout was aware of the nature of the expected performance, and that Rangen would impose the late charge if the account was not paid on time, and acquiesced in it without objection after that time. After the conversation in which Mr. Ellis said that the late charge was not part of the agreement, Rangen said it would be imposed; it was imposed, and Valley Trout continued to order food and on one occasion instructed its bookkeeper to pay the finance charge. Construing the express terms of the agreement and the course of performance as consistent with each other, Valley Trout was obligated to pay the late charge. Although Valley Trout only paid the late charge on one occasion, it was aware that Rangen would only sell the feed if the late charge was imposed on the delinquent account, as evidenced by Mr. Ellis' testimony. By continuing to order and purchase feed with knowledge of the term, Valley Trout agreed to pay the late charge. Attorney fees on appeal would be covered by the provision in the invoice. This case being remanded, any award of attorney fees by the trial court should also encompass fees on appeal. The judgment of the trial court determining the amount due for sale of goods is affirmed. That portion pertaining to computation of the late charge is reversed and remanded for further proceedings in conformance with the views expressed herein. Costs to respondents. The petition for rehearing is denied. DONALDSON, C.J., SHEPARD and BISTLINE, JJ., and McQUADE, J. Pro Tem., concur.