Allied Steel and Conveyors v. Ford Motor Company

1960 6th Circuit Court of Appeals

• Allied Steel was selling machine to Ford. Contract included indemnity clause holding Allied liable for all negligence of Allied’s employees.
• Ford is offerer, purchase order is offer. Did Allied exercise power of acceptance?
• Original clause made Allied responsible for all negligence due to their employees working in Ford Plant. Later agreement included clause making Allied liable for all negligence due to Ford’s employees working on Allied’s product in Ford Plant.
• Original contract had voided second clause (holding Allied liable for Ford’s employees); later order included contract without that clause voided.
• If contract with new terms had not yet been accepted by Allied, why was it binding? ? Acceptance is not considered to be return of acknowedgment, but rather the commencement of purpose; when Allied delivered product, they became bound by new agreement.
? Court reads acknowedgment clause of contract to indicate means of notice but not precluding acceptance by performance: ? ‘This purchase order agreement is not binding until accepted. Acceptance should be executed on acknowledgment copy which should be returned to buyer.’

• Indemnity provision is very similar to insurance: assigns risk to party better able to shoulder or prevent risk.
• Indemnifying Ford against all negligence include that of its own employees when working on Allied’s machine reduces problem of having to compute comparative fault, etc..
• UCC Categories, UCC 1-205, UCC 2-208: ? Usage of trade: trade custom in that trade, usages that people in trade should be reasonably expected to know.
? Course of dealing: Looks at relationship between parties, over time.
? Course of performance: Contract that calls for repeated performance, see how parties have dealt with that performance.

• Under course of dealing approach, would assume contract was that Ford would be indemnified only against Allied’s employees, since that is how that dealt before (court did not use this construction, however).
• Hierarchy of interpretation: starts with words of contract itself. But in this case the contract is not actually signed by both parties; acceptance in form of delivering new machine might indicate acceptance of old terms

Author: international