Roanoke Cement Company, L.L.C. v. Falk Corporation Hamilton Sundstrand Corporation

Citations: 413 F.3d 431; 58 U.C.C. Rep. Serv. 2d (West) 908; 2005 U.S. App. LEXIS 13139; 2005 WL 1539293Docket: 04-2047

Court: Court of Appeals for the Fourth Circuit; July 1, 2005; Federal Appellate Court

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In the case Roanoke Cement Company, L.L.C. v. Falk Corporation, the Fourth Circuit Court of Appeals addressed Roanoke's claim for indemnification related to losses from the failure of a pinion shaft manufactured by Falk. The court confirmed that the contract between Roanoke and Fuller Company, which included terms requiring indemnification for damages, was not enforceable due to Falk's acknowledgment of a purchase order that included a disclaimer of liability for consequential damages. Despite Roanoke's argument, the court upheld the district court's ruling that no indemnification obligation existed in the contract. The court applied Virginia law and utilized a mixed standard of review for factual findings and legal conclusions. Ultimately, the judgment favoring Falk was affirmed.

A contract exists between the parties as required by the UCC, specifically under Virginia Code Ann. § 8.2-204 and § 8.2-207(3). Roanoke and Falk dispute the agreement's terms, with the district court determining that an acknowledgment constituted the contract between Fuller and Falk. Conversely, the appellant argues that Falk's acceptance was completed through "commencement of work" before returning the acknowledgment, asserting that the purchase order's terms, including the indemnification clause, should prevail.

The appellant's claim that the purchase order's terms are controlling lacks persuasiveness, as a purchase order is typically an offer subject to acceptance. The UCC allows acceptance in any reasonable manner, but terms like "commencement of work" should not be overly interpreted. Sellers must confirm their capacity to fulfill an order, especially for specialized products, before agreeing to provide them. A rule mandating sellers to accept all offer terms upon starting preliminary investigations would discourage such practices and hinder beneficial buyer-seller relationships.

The phrase "commencement of work" in the purchase order implies a more definitive commitment from Falk than merely taking initial investigatory steps. Evidence of the parties' prior dealings indicates that they typically exchanged purchase orders and acknowledgments, with Falk often delaying acknowledgment until confirming its ability to fulfill orders. During this interim, work was not charged to Fuller, who retained the option to cancel the order before acknowledgment.

This established working relationship suggests neither party viewed itself as contractually bound prior to acknowledgment, undermining Roanoke's reliance on the purchase order's indemnity provision. The UCC supports using course of dealings to ascertain common understanding, making it relevant in interpreting ambiguous provisions like "commencement of work." Ultimately, Falk did not intend to be bound by the purchase order's terms, as evidenced by its rejection of the indemnification clause in the acknowledgment.

Falk proposed a limited warranty that excluded liability for special, incidental, or consequential damages, contrasting with the broader 'save harmless' language in the purchase order. Established legal principles dictate that contract terms consist of those mutually agreed upon by the parties, per Va. Code Ann. 8.2-207(3). Thus, even without identifying the acknowledgment as the governing document, the indemnification provision in the purchase order does not apply due to the existence of a contract. Consequently, Roanoke cannot recover from Falk based on this clause, and the district court's judgment is affirmed. Additionally, Roanoke's argument regarding the failure to notify within ten days is invalid as such acceptance only applies to confirming prior oral agreements, which Roanoke could not substantiate. Despite Roanoke's claim that the acknowledgment was not received, the district court's finding that it was sent and not objected to by Fuller stands as not clearly erroneous.