## Facts

- Ionics, Inc. manufactured hot and cold water dispensers and purchased thermostats from Elmwood Sensors, Inc. for use in those dispensers.
- Ionics sent purchase orders with printed terms stating that acceptance must be on Ionics’s exact terms and rejecting any additional or different terms; Ionics also communicated that its purchase order was the exclusive contract.
- Elmwood responded with acknowledgment forms stating Elmwood’s terms would control, including warranty disclaimers and limitations of liability (limited remedies and exclusion of consequential damages), and indicating Ionics would be deemed to assent absent objection within a stated period.
- Despite conflicting terms in the forms, Elmwood shipped thermostats and Ionics accepted and used them.
- After some dispensers allegedly caught fire due to defective thermostats, Ionics sued Elmwood for resulting damages.
- Elmwood sought partial summary judgment in federal district court, asserting its limitation-of-liability terms barred or restricted Ionics’s recovery; the district court denied the motion and certified to the court of appeals whether U.C.C. § 2-207 had been properly applied.

## Issues

1. Whether the parties’ agreement is governed by U.C.C. § 2-207(1) (including the “expressly made conditional” proviso) or by § 2-207(3) (contract by conduct despite nonmatching forms).
2. Whether the circuit’s earlier “battle of the forms” approach in Roto-Lith remains controlling where it conflicts with U.C.C. § 2-207.
3. Whether Elmwood’s limitation-of-liability and remedy-restriction terms became part of the contract so as to bar or limit Ionics’s claims.

## Decision

- The court of appeals accepted the certified question and reviewed the summary-judgment ruling de novo.
- The court held that U.C.C. § 2-207(3) governed because the parties formed a contract through performance even though their exchanged writings contained conflicting terms.
- The court rejected Roto-Lith to the extent it was inconsistent with the text and purposes of § 2-207.
- The court held Elmwood’s limitation-of-liability terms did not become part of the contract because they conflicted with Ionics’s purchase-order terms; the conflicting terms were excluded and replaced by U.C.C. default provisions.
- The court affirmed the denial of Elmwood’s motion for partial summary judgment.

## Legal Principles

- When parties proceed with performance despite materially conflicting form terms, a contract may be recognized by conduct under U.C.C. § 2-207(3).
- Under § 2-207(3), the contract terms consist of those on which the parties’ writings agree, supplemented by U.C.C. gap-fillers.
- Directly conflicting terms in competing forms are excluded from the contract (the “knock-out” approach), rather than allowing one side’s boilerplate to prevail by a last-shot theory.
- A seller’s acknowledgment does not qualify as an acceptance “expressly made conditional” on the buyer’s assent unless the conditional nature of assent is clear; treating standard protective terms as automatically “conditional” is inconsistent with § 2-207’s design.
- Warranty and remedy issues left unresolved by knocked-out boilerplate are supplied by the U.C.C.’s default rules, and a party cannot obtain summary judgment based solely on excluded limitation language.

## Conclusion

Because the parties performed despite incompatible purchase-order and acknowledgment terms, § 2-207(3) governed and the conflicting boilerplate—especially Elmwood’s liability limitations—was excluded, leaving the agreement to be completed by U.C.C. default rules and preventing summary judgment based on Elmwood’s printed limitations.


Ionics, Inc. v. Elmwood Sensors, Inc., 110 F.3d 184 (1st Cir. 1997)