Luke is a wholesale distributor of novelty supplies. Robert operates a novelty supply store. On May 1, Luke received a written order from Robert for 3000 miniature novelty cats at fifty cents each, which was the price listed in Luke’s catalog. The order from Robert stated that the cats were to be black/white and tabby with “Helena for City Council” on the front to be purchased by Helena. The order specified for delivery of half of the novelty cats by September 1st and the remaining novelty cats by October 1st.
On May 5, Luke sent Robert a written confirmation, which acknowledged the quantity, price, delivery dates, and purpose of the purchase. Both the order and the confirmation were on forms containing a number of printed clauses. The printed clauses were substantially the same on both forms, except Luke’s confirmation forms included additional clauses stating that all disputes about the transaction were to be resolved by arbitration, and that damages were limited to costs of shipping the items back for replacements.
On June 30, Robert telephoned Luke and told him another distributor offered him the same novelty cats for only forty cents each and that Robert intended to switch his order to a new distributor unless Luke agreed to lower his price. Rather than lose the sale with a long-term customer, Luke stated, “For a good customer as yourself I will give you the forty cent price.”
On August 30, Luke shipped the first 1500 novelty cats and, on September 2nd, Luke accepted Robert’s payment for those novelty cats at forty cents each. Since 1500 right color of novelty cats were not available, Luke sent 500 each of gray, white, and calico. Unbeknownst to Robert, the plastic of novelty cats reacted to heat and if they were not stored in temperatures less than 90 degrees, they would melt. Robert stored the novelty cats in a warehouse where temperatures ranged from 99 to 100 degrees. If Robert had known, he could have stored the novelty cats in proper conditions.
On September 12, Robert wrote to Luke and canceled the second half of the order because Helena dropped out of the race. When Luke received the letter of cancellation, Luke had not yet ordered the second set of novelty cats from the manufacturer.
Luke sued Robert for breach of contract in state court, seeking damages based on the original fifty cents price for those remaining 1500 novelty cats. Luke also sued for the additional ten cents per cat he is believed owed to him from the first shipment. Robert counterclaims for the ruined novelty cats. He also argues breach of contract because none of the novelty cats confirmed to the type that he specified in his order. Luke argues that if he is liable to Robert for anything, it is only the cost to return the novelty cats because of the damage limitation clause.
What arguments should each party make (Luke and Robert) and how should the case be decided? Should this case go to arbitration? Why or why not? What about the damage limitation clause?