Sterling BV, Inc. v. Cadillac Products Packaging Co.

Price-Quotes as Offers and the Enforceability of Consequential-Damage Waivers under the California UCC

Introduction

What began in 2017 as an ordinary supply arrangement for plastic-foil film erupted into a multi-million-dollar dispute over who should shoulder losses when defective packaging caused the U.S. military to reject pre-packaged meals. Sterling BV (“Sterling”), an MRE manufacturer, purchased film from Cadillac Products Packaging Company (“Cadillac”). When the film flaked, the military withheld payment; Sterling sued for both the price of the film (direct damages) and the profit it lost on its government contract (consequential damages). The pivotal question was contractual: Whose document—a Cadillac quote or a Sterling purchase order—constituted the operative “offer” under California law? The answer determined whether a waiver of consequential damages contained in Cadillac’s quote controlled the parties’ contract.

After five years of litigation in the Northern District of Georgia, a jury awarded Sterling direct damages and prejudgment interest, but the district court barred recovery of consequential damages. On cross-appeals, the Eleventh Circuit affirmed every ruling, clarifying when a detailed price quotation becomes an offer and endorsing the enforceability of a limitation-of-liability clause that excludes consequential damages.

Summary of the Judgment

• Offer Determination: Under the California UCC, Cadillac’s individualized, detail-laden price quote—solicited by Sterling—was deemed the offer. Sterling’s subsequent purchase orders constituted acceptances, rendering Cadillac’s “no consequential damages” clause part of the contract.
• Consequential Damages Barred: Because Cadillac’s quote controlled, Sterling was limited to the remedies expressly provided (refund or replacement). The district court’s summary judgment, exclusion of evidence, and reconsideration rulings were all affirmed.
• Implied Warranty Theory Rejected: Sterling could not circumvent the contractual limitation through the UCC’s implied warranty of fitness; the limited remedy did not “fail of its essential purpose.”
• Prejudgment Interest Upheld: Applying Cal. Civ. Code § 3287(b), the panel held the district court acted within its discretion in awarding interest on Sterling’s direct-damage award for the five-year litigation period.

Analysis

1. Precedents Cited

1. Tomlinson v. Wander Seed & Bulb Co., 177 Cal. App. 2d 462 (1960) – articulates the general rule that price quotations are invitations to deal.
2. Beck v. American Health Group Int'l, 211 Cal. App. 3d 1555 (1989) – cited to contrast general “willingness to bargain” from a concrete offer.
3. Restatement (Second) of Contracts § 26 cmt. c – lists factors (audience size, completeness, prior inquiries) that can transform a quote into an offer.
4. Williston on Contracts § 4:10 & § 4:13 – treatise support for treating a specific, quantitative bid as a binding offer.
5. Steiner v. Mobil Oil Corp., 569 P.2d 751 (Cal. 1977) – clarifies that under Cal. UCC § 2204, contracts may exist despite open terms (e.g., quantity).
6. Nat’l Rural Telecom. Coop. v. DIRECTV, Inc., 319 F. Supp. 2d 1040 (C.D. Cal. 2004) – addresses when a limited remedy “fails of its essential purpose.”
7. A & M Produce Co. v. FMC Corp., 135 Cal. App. 3d 473 (1982) – foundational case on discretionary prejudgment interest under § 3287(b).

Collectively, these authorities supplied the doctrinal scaffolding: a quotation may be an offer when it is particularized and complete; the Cal-UCC tolerates some open terms; and courts respect bargained-for remedy limitations unless they deprive the buyer of any meaningful relief.

2. Legal Reasoning

1. Offer vs. Invitation. The panel scrutinized:
   • Target audience (only Sterling),
   • Specificity (unit prices to 0.01¢, shipping dates, delivery location, monthly quantities), and
   • Context (quote issued in direct response to Sterling’s detailed inquiry).
   These factors matched the Restatement illustration of an offer triggered by a “single-party, detail-rich” quotation.
2. Battle of the Forms—Not Needed. Because the quote itself was the offer, there was no “Battle of the Forms” under Cal. UCC § 2207. Sterling’s purchase orders did not vary Cadillac’s critical term; they merely accepted plus minor logistics notes.
3. Enforceability of Limitation. The court recognized Cadillac’s clause as a valid consequential-damage waiver under UCC § 2719(1) so long as minimum adequate remedies existed—here, refund or replacement.
4. Implied Warranty Work-Around Rejected. Sterling argued the warranty of fitness generated separate consequential damages. The panel held the parties’ limitation of remedies foreclosed that path because the remedy did not “fail of its essential purpose.” Sterling still had two concrete options for redress.
5. Prejudgment Interest Discretion. Applying the tripartite factors distilled from California case law, the district court balanced:
   • Five-year delay,
   • An interest-free “loan” to Cadillac,
   • No settlement overtures by Sterling (neutral).
   That calculus lay squarely within § 3287(b)’s broad discretion.

3. Impact of the Decision

The Eleventh Circuit’s non-published opinion nonetheless carries persuasive weight for federal courts applying California law and for commercial drafting nationwide.

• Commercial Practice: Vendors issuing tailored quotes must treat their documents as potential binding offers—any disclaimers or limitations they wish to enforce must appear in the quote.
• Risk Allocation: Buyers cannot rely on subsequent purchase orders to re-insert more favorable terms unless there is a genuine § 2207 “battle of the forms.” Sophisticated purchasers should counter-propose or withhold acceptance, not assume their prior T&Cs will govern.
• Litigation Strategy: The case clarifies that courts will enforce consequential-damage waivers even where the breach causes large downstream losses, provided some minimum remedy remains.
• Prejudgment Interest Guidance: The opinion aggregates California factors into a practical checklist, reinforcing that dilatory tactics can backfire via statutory interest awards.

Complex Concepts Simplified

Offer vs. Invitation to Offer

A true offer empowers the recipient to create a contract by saying “yes.” An invitation merely invites the other side to make their own offer (e.g., most advertisements).

Consequential Damages

Losses that do not arise directly from the breach but from the breach’s knock-on effects (e.g., lost resale profits).

Limitation-of-Liability Clause

Contractual term capping or excluding certain damages. Under the UCC it is enforceable unless unconscionable or unless the limited remedy “fails of its essential purpose.”

Failure of Essential Purpose

Even a valid limitation can be set aside if, in practice, it leaves the injured party with no meaningful remedy (e.g., replacement goods are impossible to supply and refund is barred).

Prejudgment Interest (§ 3287(b))

Discretionary interest awarded for unliquidated contract claims to compensate the plaintiff for the time-value of money during litigation.

Conclusion

Sterling BV v. Cadillac Products underscores a fundamental—but often overlooked—principle in commercial transactions: a meticulously prepared, single-recipient price quotation can constitute the operative offer. When that quote contains a clear waiver of consequential damages, California courts will enforce it, even if the buyer’s losses dwarf the purchase price. The Eleventh Circuit’s affirmation solidifies the party-autonomy ethos of the UCC: sophisticated merchants who bargain for risk allocation will be held to their bargains. Concurrently, the decision offers concrete guidance on the Cal-UCC’s “essential purpose” test and on the equitable use of prejudgment interest to prevent strategic delay. Contract drafters, supply-chain counsel, and litigators alike should revisit their templates and practices in light of this sharpened boundary between direct and consequential loss recovery.