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Home / Questions / The Helium Contract That Tanked FACTS SVC-West, L.P., did time-share presentation...

The Helium Contract That Tanked FACTS SVC-West, L.P., did time-share presentations at hotels and ordered helium tanks quite often for balloons. SVC placed a rush order with C9 Ventures for

 

The Helium Contract That Tanked

 

FACTS

 

SVC-West, L.P., did time-share presentations at hotels and ordered helium tanks quite often for balloons. SVC placed a rush order with C9 Ventures for eight helium-filled tanks used to inflate festive balloons. C9 accepted the order and later that day delivered the tanks.

 

On the reverse of the invoice was an indemnification provision requiring SVC to indemnify C9 for any loss arising out of the use or possession of the helium-filled tanks. C9's invoice was on a single piece of paper, on the reverse side of which was an indemnity provision:

 

"INDEMNITY/HOLD HARMLESS" (boldface omitted), which stated in part: "Customer agrees to indemnify[,] defend and hold harmless C9 . . . from and against any and all liability, claims, judgments, attorneys fees and cost of . . . every[ ] kind and nature, including, but not limited to injuries or death to persons and damage to property, arising out of the use, maintenance, instruction, operation, possession, ownership or Rental & Decor of the items rented, however cause[d], except claims or litigation arising through the solo [sic] gross negligence or willful misconduct of C9. . . ."

 

The reverse side of the invoice also included a section entitled "LEGAL FEES," which provided, in essence, that in an action to enforce "this Rental & Decor Agreement," the prevailing party would be entitled to recover attorney fees.

 

C9 had presented the same or similar invoice to SVC 10 times but had received the signature of an SVC employee only six times. SVC never attempted to substitute its own form agreement for C9's form.

 

C9 typically delivered the tanks in the morning when no SVC guests were present, but on July 3, C9's employee, Ernesto Roque, did not arrive at the SVC premises to make the delivery until about 5:00 p.m. Roque asked an SVC employee, Zayra Renteria, where to place the eight helium-filled tanks. Renteria, who was expecting the delivery during her shift, instructed Roque to bring the tanks up to the mezzanine level of the resort, at which point she would inform him where to place them. Roque wrote the following on the invoice: "[N]obody would sign all running around in lobby nobody knew who. . . . After accident nobody got signatures."

 

Roque stacked five to seven tanks against the walls next to the service elevator. He was in the process of bringing up another tank when a young boy, whose parents were attending the time-share presentation, ran up to the tanks and hugged one of them, pulling it over. The tank, which was about five feet tall and weighed 130 pounds, fell on the boy's hand. He was hospitalized and underwent surgery for his injuries.

 

SVC and C9 each paid the boy's family to settle a lawsuit brought to recover for his injuries. C9 filed a cross-complaint against SVC to enforce the indemnification provision on the back of the unsigned invoice. The trial court found for C9 and SVC appealed.

 

JUDICIAL OPINION

 

FYBEL, Judge

This case could serve as a question on a law school final examination for a course on the Uniform Commercial Code. As in a law school examination, the facts are undisputed. The question: Is the indemnification provision on the back of the unsigned invoice enforceable against SVC?

 

The trial court answered the question yes, finding under California Uniform Commercial Code section 2207, the indemnification provision did not materially alter the contract and therefore became an added term.

 

We answer the question differently and hold the indemnification provision is not binding on SVC. SVC and C9 entered into an oral contract when C9 accepted SVC's telephone order for eight helium-filled tanks. The oral lease was sufficiently definite, although it left open various terms. Under section 2207, on which the trial court relied, additional terms proposed in an acceptance or confirmation may become terms of the contract in certain situations. Section 2207 is part of division 2 of the California Uniform Commercial Code, and division 2 governs transactions in goods. The oral contract between SVC and C9, however, was a lease of personal property (the helium-filled tanks), and personal property leases are governed by division 10, not division 2, of the California Uniform Commercial Code.

 

Division 10 of the California Uniform Commercial Code, which governs the oral contract between SVC and C9, does not have an analog to section 2207. The terms on the back of the unsigned invoice would have become part of the parties' oral contract only if SVC manifested assent to those terms. SVC did not manifest such assent by course of dealing or course of performance, or under basic contract law. SVC did not sign the invoice or otherwise expressly agree to its terms. An unsigned invoice itself is not a contract, and repeated delivery of a particular form does not make the form part of the parties' agreement. Payment of the invoice merely constituted SVC's performance of the obligation under the oral contract to pay for the rental of the helium-filled tanks.

 

To cover all bases (as one should when answering a law school examination question), we also construe the oral contract between SVC and C9 as if it were a transaction in goods governed by division 2 of the California Uniform Commercial Code and address whether the indemnification provision would have become an additional term under section 2207, as the trial court found. We conclude it would not. If SVC is not a merchant, the terms of the invoice are considered to be mere proposals for additional terms, which SVC did not accept. If SVC is a merchant, the indemnification provision would not have become part of the contract if the provision materially altered the contract. Because an indemnification provision is deemed a material alteration to an agreement as a matter of law, the indemnification provision on the back of the invoice would not, under section 2207, become part of the contract between SVC and C9.

 

We therefore reverse the judgment and remand with directions to enter judgment in SVC's favor. Because we reverse the judgment on which attorney fees were awarded, we also reverse the order awarding attorney fees.

1. Why is it important to determine whether the contract involved a sale or lease of goods?

Jul 26 2021 View more View Less

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