Summary
applying above principles to determine a contract under the UCC was unambiguous
Summary of this case from Qwinstar Corp. v. AnthonyOpinion
No. C0-01-2118.
Filed June 18, 2002.
Appeal from the District Court, Chisago County, File No. C8991267.
Jeffrey E. Grell, (for appellant)
Ronald J. Walsh, P.A., (for respondent)
Considered and decided by Stoneburner, Presiding Judge, Harten, Judge, and Anderson, Judge
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
The district court awarded respondent damages for breach of quasi-contract and quantum meruit. Appellant argues the district court erred by denying its motion for summary judgment and abused its discretion by allowing respondent to amend its answer to allege equitable claims after the close of evidence at trial. Appellant also argues that respondent failed to prove entitlement to equitable relief and that the district court's damage award was based on mere speculation and conjecture. Because the district court erred by denying appellant's motion for summary judgment, we reverse.
FACTS
Appellant Lund Industries, Inc. (Lund) manufactures automotive accessories. Respondent Wonder Industries, Inc. (Wonder) contracted with Lund in July 1997 to produce injection-molded running boards and step-treads that are inserted into each running board. This appeal centers on Wonder's manufacture of three "cavity-tools," which were used to manufacture the injection-molded running boards and step-treads.
In 1997, Lund decided that its running boards and step-treads (parts), which were then manufactured using a vacuum-molding process, were too expensive to produce. It also wanted to manufacture a sharper, crisper running board. Lund therefore sought to replace at least some of the vacuum-molded parts with parts created using an injection-molding process. In June 1997, Wonder submitted three quotes to Lund to manufacture three different cavity-tools, which Wonder later used to manufacture the injection-molded parts. These quotes contained boilerplate terms and conditions that purported to govern any contractual relationship resulting from Lund's acceptance of the quotes. Wonder submitted its quotes to Lund without the benefit of any technical specifications from Lund; instead, Wonder based its quotes on Lund's sample vacuum-molded parts.
In July 1997, after a series of discussions and negotiations, representatives from Lund and Wonder signed a Manufacturer/Supplier Agreement (July 1997 agreement). The agreement provided that Wonder would manufacture three cavity-tools for $138,000 and Lund would be obligated to purchase at least 25,000 injection-molded parts from Wonder, or purchase the injection-molded parts for one year. The July 1997 agreement contained several integration and exclusionary clauses that purported to limit the parties' contractual relationship to the terms and conditions of the agreement and forthcoming Lund purchase orders. The subsequent Lund purchase order restated the price of the cavity-tools and also contained boilerplate language with various terms and conditions.
Wonder subsequently issued an invoice "per contract" to Lund for $138,000 and began to manufacture the cavity-tools. Because Lund engineers were not familiar with the injection-molding process, they relied heavily on the expertise of Wonder employees, including Wonder's president Jack Wies. During the manufacture of the cavity-tools, Lund engineers suggested that certain changes be made to its original technical specifications. Consequently, the cavity-tools had to be "re-tooled" at an increased cost to Wonder. Wonder completed the cavity-tools in May 1998 and began to produce the injection-molded parts pursuant to the July 1997 agreement.
The parties' business relationship began to deteriorate. In October 1998, Lund alleged that Wonder's injection-molded parts did not satisfy its quality standards and that some of the shipments were untimely. In response, Wonder demanded additional payment for the cost overruns resulting from Lund's specification changes during the manufacturing of the cavity-tools. Wonder suggested that Lund could submit additional purchase orders and then Wonder would determine "a fair and equitable payoff" for the additional tooling costs. After completing its purchase obligations under the July 1997 agreement, Lund decided to terminate its relationship with Wonder and demanded that Wonder return its cavity-tools, which, under the July 1997 agreement, were Lund's property. Wonder refused to return the cavity-tools.
Lund subsequently brought a replevin action to compel Wonder to return the cavity-tools. Shortly thereafter, Wonder voluntarily returned the cavity-tools; however, it also brought a counterclaim against Lund for alleged cavity-tool cost overruns. Wonder alleged in its counterclaim that the July 1997 agreement obligated Lund to pay for the cavity-tool cost overruns because the terms and conditions of Wonder's quotes, which obligated Lund to pay for cost overruns, were incorporated into the agreement by reference.
Lund moved for summary judgment alleging that the July 1997 agreement unambiguously excluded the terms and conditions of Wonder's quotes. Wonder then moved to amend its answer and counterclaim to allege breach of the July 1997 agreement and breach of implied contract. Wonder also moved for summary judgment alleging that Lund owed Wonder the "reasonable value of the tooling" because the terms and conditions of Wonder's quotes were incorporated into the July 1997 agreement. The district court denied all motions for summary judgment and concluded that there were still issues of material fact and law concerning whether the terms and conditions of Wonder's quotes were incorporated into the July 1997 agreement by reference. The court also denied Wonder's motion to amend its answer and counterclaim. The court concluded that Wonder's claims under the July 1997 agreement precluded its ability to also claim equitable relief. After trial, however, the district court awarded damages to Wonder on the basis of its previously rejected equitable claims. This appeal followed.
DECISION
Lund argues the district court erred when it denied its motion for summary judgment because the July 1997 agreement, which incorporated by reference the terms of its later purchase order, is a final, integrated, and unambiguous agreement that does not incorporate the terms contained in Wonder's cavity-tool quotes. Wonder contends that the repeated references and inclusion of the cavity-tool quotes in the language of the July 1997 agreement, combined with the lack of clear exclusionary language in the agreement, created factual and legal issues of contract construction, which precluded summary judgment.
A motion for summary judgment shall be granted when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that either party is entitled to a judgment as a matter of law.
Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (citation omitted). Therefore, the proper inquiry for this court must be based on the record before the district court at the time of the summary judgment hearing, and we must disregard the subsequent proceedings.
Lund argued at the district court that summary judgment was appropriate because the integration and exclusionary clauses in the July 1997 agreement voided and nullified the terms and conditions of Wonder's cavity-tool quotes, which were sent to Lund prior to the formation of the July 1997 agreement. In response to Lund's motion for summary judgment, Wonder argued that the cavity-tool quote terms were incorporated into the July 1997 agreement. Proceeding from this assumption, Wonder argued there was a factual issue concerning the amount of damages it had sustained during its relationship with Lund.
We conclude the district court erred when it determined that summary judgment was not appropriate, because the July 1997 document constituted a final, integrated, and unambiguous agreement between the parties that specifically excluded the terms of Wonder's cavity-tool quotes. Moreover, the record before the district court at the time of the summary judgment hearing shows there were no remaining genuine issues of material fact and that Lund was entitled to judgment as a matter of law.
A. Integration
Whether a contract is completely integrated and not subject to variance by parol evidence is a question of law for the district court. United Artist Communications, Inc. v. Corporate Prop. Investors, 410 N.W.2d 39, 42 (Minn.App. 1987). "[I]f a contract is a complete integration of the parties' agreements, prior agreements within the scope of the contract are discharged regardless of consistency." Stromberg v. Smith, 423 N.W.2d 107, 109 (Minn.App. 1988) (citation omitted). A final and integrated written expression may not be contradicted by "previous `understandings and negotiations * * * for the purpose of varying or contradicting the writing.'" Apple Valley Red-E-Mix, Inc. v. Mills-Winfield Eng'g Sales, Inc., 436 N.W.2d 121, 123 (Minn.App. 1989) (quotation and citations omitted) (ellipsis in original), review denied (Minn. Apr. 26, 1989).
A determination of whether [a] written document is a complete and accurate "integration" of the terms of the contract is not made solely by an inspection of the writing itself, important as that is, for the writing must be read in light of the situation of the parties, the subject matter and purposes of the transaction, and like attendant circumstances.
Bussard v. College of St. Thomas, Inc., 294 Minn. 215, 224, 200 N.W.2d 155, 161 (1972) (citations omitted).
The July 1997 agreement, which expressly incorporates by reference Lund's purchase order, is an integrated agreement which precludes consideration of parol evidence to vary or contradict its terms. The record before the district court at summary judgment demonstrates the July 1997 agreement was the culmination of extensive discussions between the parties in response to Wonder's initial quotes. The July 1997 agreement also contained an integration clause:
This letter and Lund purchase orders will govern the agreement between Lund and Wonder regarding Wonder's manufacture and supply of the SuperSteps/Step pads. If there is a conflict between Lund purchase orders and this letter's terms, the terms in this letter will be applied.
Lund's subsequent purchase order also contained an integration clause:
23. Entire Agreement. This Purchase order, and any documents referred to herein are intended to be a complete and exclusive statement of the terms for purchasing goods and/or services from [Wonder] and constitute the entire agreement between the parties. The terms hereof can be added to or modified only by a writing signed by an authorized agent of [Lund].
Wonder admitted during discovery that the July 1997 agreement constituted the entire contractual relationship between the parties subject to the caveat that it "assert[ed] that the Contract terms do not include the quotations from Wonder that are specifically referenced in the contract." Wonder also admitted that the July 1997 agreement did not "void and nullify" the terms contained in the quotes, but rather argued that "[t]he quotes are specifically included and made a part of the contract." In its memorandum of law in support of its motion for summary judgment, Wonder alleged, "These quotes were ultimately incorporated into a written agreement drafted by Lund for the tooling and the production of the [cavity-tools]." Therefore, Wonder's admissions and arguments themselves admit that the July 1997 agreement was an integrated agreement.
Furthermore, the July 1997 agreement itself outlines several critical areas of the parties' contractual relationship, some of which expressly modify the terms and conditions of Wonder's quotes: the price of each cavity-tool; the method and timing of payment for the cavity-tools; the production duration; repair and ownership of the cavity-tools; insurance; design of the cavity-tools; the material, pricing, and production of the parts produced by the cavity-tools; the term of the parties' contractual relationship; provisions for default and cure of default; a confidentially agreement and intellectual property rights; and a choice-of-law provision.
For example, Wonder's quotes provided for immediate payment of one-half of the quoted price. The July 1997 agreement, however, provided that Lund would pay one-third of the quoted price two weeks after "Wonder receive[d] Lund's `Surface' data used to create the tool."
Therefore, the July 1997 agreement was a final, integrated and complete agreement that may not be modified by parol evidence of any prior agreements, including any business relationship that was arguably created by Lund's initial "acceptance" of Wonder's quotes.
The supreme court has stated that a valid acceptance of an offer must be unequivocal and must comply with the "mirror-image rule":
An acceptance, to be valid and to give rise to a binding contract, must be made in unequivocal and positive terms which comply exactly with the requirements of the offer. If the acceptance seeks to vary, add to, or qualify the terms of the offer, it is not positive and unequivocal, and constitutes a rejection of the offer and a counteroffer. A valid acceptance must not only embrace the terms of the offer with exactitude, but it must be unequivocally expressive of an intent to create thereby, without more, a contract.Minar v. Skoog, 235 Minn. 262, 265-66, 50 N.W.2d 300, 302 (1951) (footnote omitted); see also Alpha Venture/Vantage Props. v. Creative Carton Corp., 370 N.W.2d 649, 652 (Minn.App. 1985) (stating that a proposed acceptance that alters the terms of an offer is a rejection of the offer and is a counteroffer), review denied (Minn. Sept. 19, 1985). Here, although Wonder submitted its quotes that contained boiler-plate terms and conditions to Lund, the parties subsequently entered into negotiations that resulted in the July 1997 agreement. Therefore, Lund never accepted, for the purpose of creating a binding contractual relationship, the terms and conditions of Wonder's quotes.
B. Ambiguity
We also conclude that the integrated July 1997 agreement was unambiguous and did not incorporate by reference the terms contained in Wonder's quotes because of several explicit exclusionary clauses in the agreement.
"Whether a contract is ambiguous is a legal determination in the first instance." Blattner v. Forster, 322 N.W.2d 319, 321 (Minn. 1982).
The construction and effect of a contract are questions of law for the court, but where there is ambiguity and construction depends upon extrinsic evidence and a writing, there is a question of fact for the [fact-finder].
Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979); see also Donnay v. Boulware, 275 Minn. 37, 44, 144 N.W.2d 711, 716 (1966) (if a writing is ambiguous, a court may look to extrinsic evidence and construction of the contract then becomes a question of fact, "unless such evidence is conclusive"). "On appeal, it must be determined whether the trial court properly found ambiguity." Apple Valley Red-E-Mix, Inc., 436 N.W.2d at 123.
Where there is a reference in one instrument to the terms or provisions of a prior instrument, the prior instrument may be deemed a part of that second document to the extent of the reference to it.
Winter v. Liles, 354 N.W.2d 70, 73 (Minn.App. 1984) (citation omitted). Nevertheless, "[a]ll negotiations are superseded by a written contract. It is then a question of law whether the contract is ambiguous." Hoyt v. Brokaw, 359 N.W.2d 310, 311 (Minn.App. 1984) (citation omitted).
The district court concluded that summary judgment was not appropriate because the parties' conflicting positions concerning whether Wonder's quotes were "incorporated into the July 10, 1997 agreement * * * frame the factual and legal issues which must be decided by trial on the merits." Therefore, the district court concluded, in essence, that the July 1997 agreement was ambiguous and further extrinsic evidence was required to clarify the ambiguity. We conclude the district court erred by concluding that the agreement was ambiguous.
The cavity-tool quote language Wonder claims was incorporated into the July 1997 agreement purports to make Lund responsible for the additional tooling charges Wonder incurred for design changes during the tool-manufacturing process:
[Lund] agrees to pay for and accept the responsibility for any changes in molds and tools made necessary by changes in [Lund's] specifications as originally accepted by Wonder.
The July 1997 agreement, however, contains several exclusionary clauses, which limit the parties' agreement to the terms of the agreement and to Lund's subsequent purchase order:
This letter agreement and the Lund purchase orders are the only agreements between Lund and Wonder with respect to the products, SuperStep Quote #2687, Extended Cab SuperStep Quote #2686, and the StepTread Quote #2688, and any written or oral agreements entered into prior to the execution of this letter agreement are void and nullified.
(Emphases added.) The July 1997 agreement also expressly limits Lund's liability for the cost of producing the cavity-tools to $138,000:
Lund shall have full ownership of all * * * cavity tools at all times; however, Lund, as limited by paragraph 1 of this letter agreement [to $138,000], shall pay for the documented expenses, labor or otherwise, incurred by Wonder to produce the * * * cavity tools.
(Emphasis added.) Moreover, Lund's purchase order, which the July 1997 agreement expressly and unequivocally incorporates by reference, states that any increased cost resulting from changes in the tooling must be approved by Lund in writing:
If any [change to this purchase order] shall cause an increase or decrease in the cost or time required for performance of this Purchase Order, an equitable adjustment shall be made on the contract price * * * [if] approved by [Lund] in writing before [Wonder] proceeds with such change. Price increases shall not be binding on [Lund] unless evidenced by a Purchase Order revision duly signed by [Lund]. [Wonder] shall make no changes to this Purchase Order without [Lund's] express prior written consent.
(Emphasis added.)
The exclusionary clauses in both the July 1997 agreement and Lund's purchase order seek to limit the parties' contractual relationship to the terms of those documents. Put more simply, the later-negotiated agreement between the parties makes Wonder's boilerplate quote provisions irrelevant.
Moreover, it is clear that the references in the July 1997 agreement to the Wonder quotes were intended to establish a point of reference for the subject matter of the agreement. The July 1997 agreement was a final, integrated, and unambiguous agreement that did not include the terms and conditions of Wonder's quotes. Consequently, the district court erred by denying Lund's motion for summary judgment. Because summary judgment should have been granted in favor of Lund, we do not reach Lund's claims relative to trial.
Because there are no further claims or counterclaims arising out of Lund's original replevin action to adjudicate in a district court proceeding, there is no need for a remand to the district court. Accordingly, we reverse the district court order denying summary judgment to Lund and direct that judgment be entered in favor of Lund.