Opinion ID: 769029
Heading Depth: 3
Heading Rank: 3

Heading: Surprise.

Text: 34 Surprise, within the meaning of the material alteration exception of § 2-207(2)(b), has both the subjective element of what a party actually knew and the objective element of what a party should have known. See American Ins. Co. v. El Paso Pipe & Supply Co., 978 F.2d 1185, 1191 (10th Cir. 1992); In re Chateaugay, 162 B.R. at 956-57. A profession of surprise and raised eyebrows are not enough: [C]onclusory statements, conjecture, or speculation by the party resisting the motion will not defeat summary judgment. Kulak v. City of New York, 88 F.3d 63, 71 (2d Cir. 1996). To carry the burden of showing surprise, a party must establish that, under the circumstances, it cannot be presumed that a reasonable merchant would have consented to the additional term. See Union Carbide, 947 F.2d at 1336. 35 OMT has adduced evidence that the Tax Clause came as an amazement to OMT's executives, who described the term's incorporation as contract by ambush and a sl[e]ight-of-hand proposal. Thus OMT has sufficiently exhibited its subjective surprise. As to objective surprise, however, OMT has alleged no facts and introduced no evidence to show that a reasonable petroleum merchant would be surprised by the Tax Clause. See In re Chateaugay, 162 B.R. at 957 (including as types of evidence proving objective surprise the parties' prior course of dealing and the number of written confirmations that they exchanged, industry custom and the conspicuousness of the term). OMT had no prior contrary course of dealing with Bayway, and offered nothing concerning trade custom or practice. 36 Ordinarily, our inquiry into surprise would end here. However, in response to OMT's claim of surprise, Bayway introduced evidence that the Tax Clause reflects custom and practice in the petroleum industry, and on appeal OMT argues that Bayway's own evidence raises a genuine issue of material fact as to whether such a trade practice exists. Although the evidence was introduced by Bayway, 4 we are obligated to search the record and independently determine whether or not a genuine issue of fact exists. Jiminez v. Dreis & Krump Mfg. Co., 736 F.2d 51, 53 (2d Cir. 1984) (quoting Higgins v. Baker, 309 F. Supp. 635, 639 (S.D.N.Y. 1970)) (internal quotation marks omitted). 37 Upon our review of the evidence, we conclude that Bayway has adduced compelling proof that shifting tax liability to a buyer is the custom and practice in the petroleum industry. Two industry experts offered unchallenged testimony that it is customary for the buyer to pay all the taxes resulting from a petroleum transaction. One expert stated that [t]his practice is so universally understood among traders in the industry, that I cannot recall an instance, in all my years of trading and overseeing trades, when the buyer refused to pay the seller for excise or sales taxes. 38 OMT cites the standard contracts of five major petroleum companies that Bayway introduced to illustrate contract terms similar to the Tax Clause. OMT argues that only three of the five place the tax liability on the buyer, and that there is therefore an issue of fact as to whether the Tax Clause would objectively surprise a merchant in this industry. 39 OMT misconstrues the evidence. Three of the contracts--those of CITGO Petroleum, Conoco, and Enron--mirror the Tax Clause. A fourth, Chevron's, differs from the others only in that the cost of the taxes is added into the contract price rather than separately itemized. Thus Chevron's standard contract affords OMT no support. 40 The fifth example, the Texaco contract, is silent as to the tax allocation issue in this case. But on this unrebutted record of universal trade custom and practice, silence supports no contrary inference. 41 Moreover, common sense supports Bayway's evidence of custom and practice. The federal excise tax is imposed when taxable fuels are sold to any person who is not registered under [26 U.S.C. § 4101]. 26 U.S.C. § 4081(a)(1)(A)(iv). The buyer thereby controls whether any tax liability is incurred in a transaction. A trade practice that reflects a rational allocation of incentives (as trade practices usually do) would place the burden of the tax on the party that is in the position to obviate it--here, on OMT as the buyer. 42 Viewing Bayway's evidence in the light most favorable to OMT, we conclude that allocating the tax liability to the buyer is the custom and practice in the petroleum industry. OMT could not be objectively surprised by the incorporation of an additional term in the contract that reflects such a practice. 43