The Custom Conveyor: Battle of the Forms and Repudiation
On January 10, Buyer and Seller orally agree that Seller will build a custom conveyor for Buyer for $120,000, delivery June 1. Buyer emails a purchase order stating 'time is of the essence' and containing no warranty. Seller replies with a signed confirmation adding a 90-day parts warranty and a clause disclaiming consequential damages. Buyer says nothing. On April 1, Seller emails: 'Steel costs have doubled; we cannot perform at $120,000 and will not deliver unless you pay $150,000.' Buyer refuses, waits, and on May 15 buys a comparable conveyor elsewhere for $150,000. Seller sues for breach, arguing that Buyer's silence accepted Seller's terms and that Buyer failed to mitigate by not paying the $150,000.
1. Which terms govern the contract under the UCC, and does Seller's confirmation become part of the deal?
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The contract is for specially manufactured goods, so UCC Article 2 governs despite the custom build. The oral agreement is enforceable because the signed confirmation satisfies the statute of frauds as between merchants, and the quantity is stated. Under UCC § 2-207, a definite offer and a timely expression of acceptance create a contract even if terms differ. Between merchants, additional terms in the confirmation become part of the contract unless they materially alter it, the offer expressly limits acceptance, or the offeror objects within a reasonable time. A consequential-damages disclaimer and a warranty addition likely materially alter the bargain. Buyer's silence is not objection, but materiality keeps those terms out; 'time is of the essence' in Buyer's purchase order may govern.
2. Was Seller's April 1 email an anticipatory repudiation, and was Buyer required to accept the $150,000 demand?
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The email is a clear and unequivocal anticipatory repudiation: Seller stated it would not deliver unless paid $150,000, a demand outside the contract. Buyer could treat the repudiation as a breach, suspend performance, or wait a commercially reasonable time for retraction. Buyer was not required to accept Seller's demand or to pay more. Waiting until May 15 was not a failure to mitigate; a nonbreaching buyer may await performance for a reasonable time and then cover. Seller cannot convert its own repudiation into a mitigation failure by demanding a higher price.
3. What damages can Buyer recover, and what effect, if any, does the disclaimer have?
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Buyer may recover the difference between the cost of cover and the contract price: $150,000 minus $120,000 equals $30,000, plus incidental and reasonable consequential damages caused by the breach, less any expenses saved. If the consequential-damages disclaimer is excluded under § 2-207, it does not bar those damages. Even if included, it would not bar the basic cover remedy. Seller's demand for an extra $30,000 is not a defense; it is the breach. Buyer must show the cover purchase was made in good faith and without unreasonable delay.