Opinion ID: 380353
Heading Depth: 1
Heading Rank: 1

Heading: If A True Lease

Text: 17 If the lease was a true lease, Earman argues that the only sale of the equipment was from Burroughs to NER. That contract is set out by NER's purchase order. The purchase order expressly designates Earman as intended lessee. Because Earman is so designated it is persuasively argued that Earman is a third party beneficiary with the right to enforce the provisions of the purchase order. American Empire Insurance Co. of South Dakota v. Fidelity & Deposit Co. of Maryland, 408 F.2d 72 (5th Cir. 1969); Weimar v. Yacht Club Point Estates, Inc., 223 So.2d 100 (Fla.App.1969). 18 As third party beneficiary, Earman first argues that it is entitled to enforce the implied warranty rights of NER against Burroughs. Earman recognizes, however, that its implied warranty theory is made difficult by two terms of the NER-Burroughs contract, as set out on NER's purchase order form. One term, left partially uncompleted, was rubber-stamped onto the purchase order by Burroughs: 19 By the below signature of buyer, or his authorized representative, the sale of this equipment shall be governed by the terms and conditions contained in agreement Form No. , the receipt of copies of which are hereby acknowledged by the buyer. Further, the buyers purchase order printed terms and conditions herein are null and void.The period of normal maintenance coverage applicable to equipment purchased hereunder is months. 20 This term is stamped on the face of the purchase order, directly below the description of the equipment purchased. That placement and the fact that the term is rubber-stamped, tends to make the term conspicuous even though the print of the term is smaller than that used in the rest of the purchase order. This term obviously refers to the ESC, which contains the disclaimers and limitations of liability which seemingly defeat Earman's claims. 21 Even if for some reason the rubber-stamped term does not apply, another term of NER's purchase order form also indicates that the provisions of the ESC apply to Earman's claims (emphasis supplied): 22 You (Burroughs) warrant that EQUIPMENT will comply with all warranties, agreements and representations made by you to LESSEE (Earman), By your acceptance (Burroughs's acceptance) of this order and invoice to us (NER), you agree that you will make available to LESSEE (Earman) and will permit LESSEE (Earman) to enforce against you your standard representations, warranties and service obligations in the same manner as if LESSEE (Earman) were the purchaser of the EQUIPMENT. 23 This term is an integral part of the purchase order form, printed in a type size equal to that of other portions of the form. 24 Earman launches an innovative attack on these two terms. Earman argues that the terms (i) are not conspicuous and (ii) do not mention the word merchantability. Therefore, under U.C.C. § 2-316(2), 13 the terms are insufficient to disclaim (i) all implied warranties and (ii) the implied warranty of merchantability, respectively. Since those implied warranties are not effectively disclaimed, Earman concludes that it may recover as a third party beneficiary of NER's implied warranty rights. 25 The obvious weakness in Earman's attack is that those terms of the purchase order are not warranty disclaimers in the first place. It is unimportant that the terms may not meet § 2-316(2)'s requirements. Clearly perceived, the second of the terms is an express grant of third party beneficiary rights to Earman but conditioned with an incorporation of Burroughs's standard representations, warranties and obligations (emphasis supplied). The term expressly provides that all warranties, agreements and representations made by Burroughs to Earman are to be enforceable by Earman. By specifying that Earman was to be treated as a purchaser and by referring to Burroughs's standard representations, the language itself seemingly incorporates the prior dealings of Burroughs and Earman. Those prior dealings encompass the ESC and its exculpatory provisions. We find that this language is sufficient to condition Earman's third party rights to the terms and conditions of the ESC, which embodies all of the prior dealings of Earman and Burroughs. 26 Furthermore, the first term, though not filled in, was an obvious attempt to incorporate by reference the terms and conditions of the ESC. The Code provides that a course of dealing between the parties is relevant to the interpretation of uncertain, incomplete terms. 14 The dealings between Earman, Burroughs, and NER certainly indicate that the incomplete portion of the purchase order was intended to refer to the ESC, thereby incorporating it by reference. 27 That Earman's third party rights under the purchase order are governed by the ESC's terms and conditions is further supported by a venerable principle of contract law. In a computer lease case almost identical in facts to the instant one, the Kansas Supreme Court stated: 28 It is well settled principle of law that where two or more documents are executed by the same parties at or near the same time in the course of the same transaction and concern the same subject matter they will be read and construed together. 29 Atlas Industries, Inc. v. National Cash Register Co., 216 Kan. 213, 220, 531 P.2d 41, 46-47 (1975) (citing Topeka Savings Association v. Beck, 199 Kan. 272, 428 P.2d 779 (1967). The principle applies to documents executed in the course of a transaction even though they are executed days or weeks apart. Florida recognizes this contemporaneous transaction principle. J. M. Montgomery Roofing Co. v. Fred Howland, Inc., 98 So.2d 484 (Fla.1957); Northwestern Bank v. Cortner, 275 So.2d 317 (Fla.App.1973) (loan guarantee was subject to terms of loan agreement, yet was executed several days before the loan agreement was executed). 30 The documents involved in the instant case were executed over a 12-day period and manifestly concerned the same transaction. Reading the lease, purchase order, and ESC together is therefore appropriate. Although viewed in isolation the ESC was executory, when it is viewed as part of the entire transaction it is apparent that the ESC's statement of rights and obligations continues to govern Earman's relationship with Burroughs. The purchase order (and even, more obliquely, the lease), 15 incorporates the ESC in the context of defining Earman's rights. Thus the ESC governs Earman's rights with respect to Burroughs.