## Facts

- Krack Corporation manufactured industrial cooling units using steel tubing supplied by Metal-Matic, Inc.
- Krack and Metal-Matic had a long-term commercial relationship conducted through a consistent forms exchange: Krack sent blanket purchase orders and periodic release orders; Metal-Matic responded with acknowledgment forms and shipped tubing.
- Metal-Matic’s acknowledgment form included (on the reverse side, referenced conspicuously on the front) terms disclaiming consequential damages and limiting remedies to refund, replacement, or repair.
- The acknowledgment also stated that Metal-Matic’s acceptance was expressly conditional on Krack’s acceptance of the acknowledgment’s terms.
- Krack’s purchase orders did not include Metal-Matic’s limitation/disclaimer terms, and Krack never signed or otherwise expressly agreed to them.
- Krack’s purchasing manager objected to the limitation/warranty terms at one point; Metal-Matic refused to change them, and the parties continued transacting.
- Krack sold a cooling unit to Diamond Fruit Growers, Inc.; tubing allegedly failed, causing an ammonia leak that damaged Diamond’s fruit inventory.
- Diamond sued Krack; Krack impleaded Metal-Matic seeking contribution or indemnity based on allegedly defective tubing.

## Issues

1. Whether Metal-Matic’s consequential-damages disclaimer and limitation-of-liability terms became part of the Krack–Metal-Matic contract under U.C.C. § 2-207 where Metal-Matic’s acknowledgment was expressly conditional.
2. If those terms did not become part of the contract, whether Metal-Matic could nonetheless invoke them to bar or limit Krack’s contribution claim.

## Decision

- The Ninth Circuit affirmed the judgment holding Metal-Matic liable in contribution to Krack (30% of Krack’s liability to Diamond).
- Metal-Matic’s limitation and disclaimer terms were not part of the parties’ contract because Krack did not give a specific and unequivocal expression of assent to those additional terms.
- The parties formed a contract by conduct under U.C.C. § 2-207(3), and conflicting boilerplate terms appearing only in Metal-Matic’s acknowledgment were excluded.

## Legal Principles

- Under U.C.C. § 2-207(1), an acceptance that is expressly made conditional on the other party’s assent prevents contract formation by the writings absent assent to the additional/different terms.
- When the parties perform despite nonmatching forms and no contract is established by the writings, U.C.C. § 2-207(3) recognizes a contract by conduct.
- In a § 2-207(3) contract, terms consist of the provisions on which the forms agree plus U.C.C. gap-fillers; conflicting additional terms are “knocked out.”
- To incorporate additional terms presented in an expressly conditional acknowledgment, the other party must provide a specific and unequivocal expression of assent; continued ordering and acceptance of goods, even with notice of boilerplate and a course of dealing, is insufficient, especially after an objection.

## Conclusion

The court held that Metal-Matic’s boilerplate disclaimer and limitation-of-liability terms did not bind Krack because Krack never specifically and unequivocally assented; the parties’ performance instead created a contract under U.C.C. § 2-207(3) that excluded the conflicting limitation terms and left Metal-Matic subject to contribution liability.


Diamond Fruit Growers, Inc. v. Krack Corp., 794 F.2d 1440 (9th Cir. 1986)