## Facts

- Princess Cruises hired General Electric (GE), the ship’s turbine manufacturer, to inspect and repair the main turbines of the SS *Sky Princess* during a scheduled shipyard period, with parts supplied as needed.
- Princess sent a purchase order describing the work and including its standard terms, including a warranty of workmanlike quality and restrictions on unilateral term changes.
- GE responded with a fixed-price quotation, then a final price quotation (with a revised scope and price) that expressly incorporated GE’s terms and conditions and rejected Princess’s terms.
- GE’s terms limited remedies to repair or replacement, capped liability at the greater of $5,000 or the contract price, and disclaimed consequential damages, lost profits, and lost revenues.
- Princess orally authorized GE to proceed based on the final quotation; GE later sent a written acknowledgment stating GE’s terms would govern.
- During performance, GE recommended cleaning and balancing the rotor ashore; cleaning removed material from the rotor, causing imbalance, delays, and cancellation of one or more cruises.
- Princess paid the contract price and sued for contract and warranty damages, seeking substantial losses tied to the cancellations.

## Issues

1. Whether the parties’ mixed contract was predominantly for services (common law) or for goods (UCC Article 2).
2. If common law governed, whether GE’s final price quotation operated as a counteroffer accepted by Princess, making GE’s liability limits and damage disclaimers controlling.
3. Whether incidental and consequential damages could be awarded despite GE’s contractual exclusions and limitations.

## Decision

- The Fourth Circuit held the contract was predominantly for inspection and repair services, with parts incidental; the UCC did not apply.
- Applying common-law offer-and-acceptance rules, GE’s final price quotation was a counteroffer with materially different terms that Princess accepted by authorizing performance and paying.
- GE’s limitation-of-liability and consequential-damage exclusion terms governed and were enforceable between sophisticated commercial parties.
- The district court erred by instructing the jury under UCC § 2-207 and allowing damages inconsistent with GE’s controlling terms.
- The court reversed the denial of GE’s renewed motion for judgment as a matter of law and remanded to modify the judgment to conform to GE’s contractual limitations.

## Legal Principles

- A mixed goods-and-services contract is governed by the UCC only if its predominant purpose is the sale of goods; if services predominate, common-law contract rules apply.
- Under common law, an acceptance that materially varies the offer functions as a counteroffer and rejects the original offer; the contract forms on acceptance of the counteroffer.
- In commercial service contracts, negotiated limitations of liability and exclusions of consequential damages are generally enforceable absent unconscionability or a public-policy bar.
- When the governing law is misidentified (e.g., applying UCC battle-of-forms rules to a service contract), damages premised on the wrong framework cannot stand.

## Conclusion

Because the agreement’s main objective was turbine inspection and repair rather than a sale of goods, common law governed contract formation and interpretation; Princess accepted GE’s counteroffer, so GE’s liability cap and consequential-damage exclusions controlled and required reduction of the jury’s damages award on remand.


Princess Cruises, Inc. v. Gen. Elec. Co., 143 F.3d 828 (4th Cir. 1998)