## Facts

- Union Carbide sold plastic sausage casings to Oscar Mayer under recurring purchase orders and invoicing.
- Union Carbide’s invoices initially included two 1% Chicago-area sales taxes in the stated price.
- After a competitor offered a lower price by routing orders through a non-Chicago office, Union Carbide instructed customers to send orders to an address outside Chicago and stopped paying the two sales taxes; it removed the taxes from invoices, reducing the effective price by 2%.
- Eight years later, Illinois tax authorities determined the taxes had been due despite the change in ordering address and assessed Union Carbide $88,000 in back taxes and $55,000 in interest.
- Union Carbide paid the assessment and sued Oscar Mayer for reimbursement, relying on a boilerplate invoice/price-book clause stating: “In addition to the purchase price, Buyer shall pay Seller the amount of all governmental taxes … that Seller may be required to pay with respect to the production, sale or transportation of any materials delivered hereunder.”
- The district court granted summary judgment to Oscar Mayer, and Union Carbide appealed.

## Issues

1. Whether the boilerplate tax-shifting clause on Union Carbide’s invoices became part of the parties’ contract under UCC § 2-207 when Oscar Mayer’s purchase orders were the offers and the invoices were acceptances containing additional terms.
2. Whether the clause, properly construed, required Oscar Mayer to reimburse Union Carbide for back taxes and interest assessed years later due to Union Carbide’s nonpayment.

## Decision

- The Seventh Circuit affirmed summary judgment for Oscar Mayer.
- The court held the boilerplate clause did not clearly obligate Oscar Mayer to indemnify Union Carbide for back taxes and interest later assessed on Union Carbide.
- Treating Oscar Mayer’s purchase orders as offers and Union Carbide’s invoices as confirmations/acceptances with additional terms, the court concluded that Union Carbide’s expansive reading would materially alter the bargain under UCC § 2-207 and therefore could not bind Oscar Mayer without explicit assent.
- The court found no evidence that Oscar Mayer expressly agreed to assume open-ended liability for Union Carbide’s long-delayed sales-tax exposure.

## Legal Principles

- Under UCC § 2-207(2), additional terms in a written confirmation between merchants become part of the contract unless they materially alter the contract, the offer limits acceptance to its terms, or the offeror timely objects.
- A term is a material alteration when it would impose unreasonable surprise or hardship such that assent cannot fairly be presumed from silence or routine performance.
- Boilerplate language stating the buyer will pay “governmental taxes” is ordinarily read as a pass-through for taxes applicable to the particular sale at the time of transaction, not as an open-ended indemnity for the seller’s later-assessed tax liabilities and interest.
- Absent clear agreement, contract interpretation and default risk allocation generally place the cost of tax-compliance mistakes on the party best positioned to avoid them, typically the taxpayer/seller responsible for compliance.

## Conclusion

The Seventh Circuit refused to treat a seller’s invoice boilerplate as shifting to the buyer the risk of the seller’s later-assessed sales taxes and interest, holding that such an expansive tax-indemnity term would materially alter the parties’ deal under UCC § 2-207 and was unenforceable without explicit buyer assent.


Union Carbide Corp. v. Oscar Mayer Foods Corp., 947 F.2d 1333 (7th Cir. 1991)