Northrop Corp. v. Litronic Industries

Northrop Corp. v. Litronic Industries

1994 7th Circuit

• Litronic offered to sell printed wire boards to Northrop.
• Litronic’s form constitutes the offer (rather than the buyer’s purchase order which is usually considered to be offer).
• Issue of whether additional means additional or different in UCC.
• Significant difference between 90 day warranty and unlimited warranty (under the code)
• Posner adopts the ‘gap-filling’ interpretation–discrepant terms fall out and are replaced by a suitable UCC provision and use Illinois Law.
• Using UCC gap-fillers gets to ‘neutral ground’, even though this is not his preferred ground. Erie doctrine requires Posner to adopt Illinois law in diversity case.

Default Rule: Rule provided by statute that parties can contract around. Very different from criminal law–no contracting out of default rules in criminal law.

UCC 1-102(3): (3) The effect of provisions of this Act may be varied by agreement, except as otherwise provided in this Act and except that the obligations of good faith , diligence, reasonableness and care prescribed by this Act may not be disclaimed by agreement but the parties may by agreement determine the standards by which the performance of such obligations is to be measured if such standards are not manifestly unreasonable.

F.O.B.: ‘free on board’ — seller will place sold item on means of transportation.

Can contract around terms specified in UCC (e.g., F.O.B.) but in absence of that default rules will be used.

By making default rule the same as majority/expected rule, then parties won’t be surprised by court’s interpretation in case of conflict without contractual specification. Some default rules don’t go by majoritian philosophies, known as penalty default rules.

Warranties: 2-312, 2-316. Parties can contract around implied warranty of merchantibility. Seller has superior information, needs to make clear if there is no implied warranty of merchantibility. Rule is not neutral but is a penalty rule against seller–since they have the information about the limitations on the warranty.

Companies often exclude all warranties include warranty of merchantibility, and then state express warranty.

Author: international