## Facts

- U.S. Aprons, Inc. (Aprons) purchased textiles from R-Five, Inc. (R-Five) for use in Aprons’ manufacturing operations.
- After receiving and using the textiles, Aprons experienced problems with the fabric and claimed the goods were defective.
- Aprons sued R-Five asserting warranty-based claims, including breach of express warranty and breaches of the implied warranties of merchantability and fitness for a particular purpose.
- R-Five argued that the Worth Street Textile Market Rules (Worth Street Rules) applied to the transactions and contained provisions that disclaimed warranties and restricted remedies.
- The purchase orders between the parties did not reference the Worth Street Rules or state that the sales were subject to them.
- Aprons asserted it was not aware of the Worth Street Rules, and Aprons’ customers were also not aware of the Rules.
- To support its claim that the Worth Street Rules were part of the contract through “usage of trade,” R-Five relied mainly on (1) testimony from an employee of a company owned by R-Five and (2) a reference to the Worth Street Rules on the National Textile Association’s website.
- R-Five moved for summary judgment, contending that the Worth Street Rules barred or limited Aprons’ warranty claims as a matter of law.

## Issues

1. Whether R-Five established, as a matter of law, that the Worth Street Textile Market Rules were incorporated into the parties’ contract as a U.C.C. usage of trade.
2. If the Worth Street Rules were incorporated, whether their disclaimer and limitation provisions defeated Aprons’ warranty claims on summary judgment.

## Decision

- The court denied R-Five’s motion for summary judgment.
- The court found R-Five’s showing insufficient to prove, beyond genuine factual dispute, that the Worth Street Rules were so regularly observed in the relevant textile trade that they became part of the parties’ agreement by usage of trade.
- Because incorporation of the Worth Street Rules was not established as a matter of law, R-Five could not obtain summary judgment based on the Rules’ alleged warranty disclaimers or remedy limits.
- Aprons’ warranty claims were allowed to proceed.

## Legal Principles

- Under the U.C.C., a “usage of trade” is a practice or method of dealing with such regularity in a trade that it justifies an expectation it will be observed in the transaction at issue.
- A party seeking to add terms through usage of trade must present evidence from which a factfinder could conclude both (a) regular observance of the practice in the relevant trade and (b) that the other party had reason to know of it.
- When contract documents do not reference outside trade rules, a court may require stronger proof before treating those rules—especially rules that reduce warranties or remedies—as part of the parties’ bargain.
- Summary judgment is not appropriate when the record permits reasonable disagreement about whether an asserted trade usage exists, applies to the transaction, or can be charged to the opposing party.

## Conclusion

U.S. Aprons holds that a seller cannot win summary judgment by pointing to industry rules that disclaim warranties or limit remedies unless the seller can show, with competent evidence, that those rules were part of the parties’ contract—either by express incorporation or by a trade usage so regularly followed in the relevant market that the buyer had reason to know the transaction was subject to them.


U.S. Aprons, Inc. v. R-Five, Inc., 2010 WL 489540 (2010)