Question: Frigidaire, which manufactures freezers, contacted McGill Manufacturing Co. about purchasing an electrical switch that McGill had advertised as "water resistant." McGill sent Frigidaire some samples of the switches and a price quotation that contained the conditions of sale on its reverse side. Among those conditions was a statement that limited McGill's warranty obligations to either repayment of the purchase price or replacement of the returned parts. The samples were not completely water resistant, so the parties agreed upon a slight redesign of the switches, with a corresponding increase in price. Frigidaire then sent McGill a blanket purchase order for the redesigned switches.
The purchase order set forth Frigidaire's terms and conditions of purchase, which included express warranties of merchantability and fitness for a particular purpose. The purchase order also stated: This Purchase Order is to be accepted in writing by Seller by signing and returning promptly to Buyer the Acknowledgment Copy, but if for any reason Seller should fail to sign and return to Buyer the Acknowledgment Copy, the commencement of any work or performance of any services hereunder by Seller shall constitute acceptance by Seller of this Purchase Order and all its terms and conditions. Acceptance of this Purchase Order is hereby expressly limited to the terms hereof. Any terms proposed by Seller which add to, vary from, or conflict with the terms herein shall be void and the terms hereof shall govern. If this Purchase Order has been issued by Buyer in response to an offer the terms of which are additional to or different from any of the provisions hereof, then the issuance of this Purchase Order by Buyer shall constitute an acceptance of such offer subject to the express condition that the Seller assent that this Purchase Order constitutes the entire agreement between Buyer and Seller with respect to the subject matter hereof and the subject matter of such offer.
The purchase order stated the original price of the switches, not the increased price that reflected the agreed-upon redesign. The next day, McGill sent a computer-generated acknowledgment form, which set forth terms similar to the terms on the original price quotation but which included additional limitations and exclusions of warranties. Ten days later, McGill's sales representative changed the incorrect price on the purchase order form, signed it, and returned it to Frigidaire. Frigidaire produced several thousand freezers containing McGill's switches. The switches began to fail within a matter of months. Frigidaire filed suit, alleging breach of contract and breach of express and implied warranties and seeking in excess of $1.5 million in damages. Frigidaire argues that the terms found in its blanket purchase order should control; McGill argues that the terms found in its acknowledgment form should control. Which party is correct, and why?