Transwestern Pipeline Co. v. Monsanto Co

In Transwestern Pipeline Co. v. Monsanto Co. (1996) 46 Cal.App.4th 502, the purchaser of turbine lubricant containing polychlorinated biphenols (an environmental contaminant) sued the seller for equitable indemnity after the purchaser settled a claim with the owners of a pipeline that became contaminated. (Id. at pp. 508-510.) The purchase orders for the lubricant contained no limitations on remedies against the seller. (Id. at p. 513.) The seller's invoices, on the other hand, expressly conditioned acceptance on assent to a limitation of liability clause. (Ibid.) To determine the contract terms, the Transwestern court applied section 2207(3), noting that in a battle of forms "'all of the terms on which the parties' forms do not agree drop out, and the Uniform Commercial Code supplies the missing terms.'" (Transwestern, supra, 46 Cal.App.4th at p. 515.) The court agreed with the seller that the reference to "'supplementary terms'" in section 2207(3) "may include terms incorporated as a result of the parties' course of dealing" because section 1201 states that the parties' agreement can be implied from their course of dealing. (Transwestern, at p. 516, citing 1201, subd. (3), 1205.) However, the court rejected the seller's argument that unilaterally transmitting a form with a limitation of liability was sufficient to establish a course of dealing, reasoning that "the mere exchange of forms containing inconsistent terms, for however long a period, cannot establish a common understanding between the parties as to which set of conflicting terms is part of their contract." (Id. at p. 516.) Importantly, the court found the forms inconsistent based on the purchase orders' silence regarding liability limitations. (Ibid. noting the "purchase orders repeatedly stated terms and conditions which contained no limitations on ... liability".) The court concluded that the purchaser's silence was not express assent to the limitation on liability and therefore the limitation was not a term of the parties' contract. (Id. at pp. 516, 519.)