Laidlaw Environmental Services v. Honeywell

Citation: Laidlaw Environmental Servs., Inc. v. Honeywell, Inc., 966 F. Supp. 1401 (D.S.C. 1996).

Factual Background
Plaintiff, Laidlaw, operates a hazardous waste incineration facility in South Carolina. In 1991, Laidlaw wished to replace its computer control system with a newer one. Plaintiff hired outside engineering firm Lockwood Greene Engineers (Lockwood) to create a “request for proposal” (RFP). The RFP provided prospective performance requirements and specifications that were necessary in order for the companies computer control system to function as desired. Included with the RFP were certain Terms and Conditions (Instructions) that governed the agreement. The Instructions explicitly stated “any exceptions to the Instructions were to be clearly noted on a bidder’s proposal, in which case such exceptions were to be construed as a counteroffer."

In early July 1991, Lockwood sent the RFP to Honeywell, Inc. (Honeywell). On July 18, 1991, Honeywell responded to the RFP with a written proposal to provide Laidlaw with Honeywell’s “TDC 3000 Distributed Control System”. Honeywell’s proposal specifically stated that the TDC 3000 System was “not offered in conformance with particular standards or codes and included certain disclaimers and limitations of remedies pertaining to the System.

Throughout August and September 1991, Laidlaw and Honeywell held a series of negotiations with the purpose of resolving the differences between Laidlaw’s terms and Honeywell’s terms. The negotiations culminated in a contract in which Honeywell’s disclaimers and limitations prevailed. The final Terms of the disclaimed any warranties regarding the TDC 3000 System, but also limited Laidlaw’s remedy to repair or replacement.

On September 30, 1991 Honeywell’s senior counsel sent a receipt to Laidlaw acknowledging the purchase of the system. No further negotiations occurred after Honeywell’s receipt of Laidlaw’s signed copy of the contract and Honeywell’s letter of confirmation.

Pursuant to the written agreement that came out of the August/September negotiations, Honeywell developed the hardware and software necessary to fulfill Laidlaw’s RFP requirement. In December 1991, several Laidlaw representatives traveled to Honeywell’s manufacturing facility to review the hardware and conduct an “Acceptance Test.” Laidlaw approved the equipment and in early 1992 Honeywell’s TDC 3000 System was installed in Laidlaw’s facility.

In the three years following installation of the TDC 3000 System, Laidlaw was penalized by the EPA on four occasions for failing to comply with the provisions that relate to the monitoring and measurement of carbon monoxide, but none of the provisions were set forth in the RFP sent to Honeywell nor were the specifications discussed during negotiations. In addition to the EPA fines, Laidlaw also incurred numerous expenses in connection with maintenance and repair of the System.

As a result of the unforeseen expenses and fines, Laidlaw brought suit against Honeywell. In their complaint, Laidlaw asserted the following five claims against Honeywell: (1) breach of contract; (2) breach of warranty; (3) breach of implied warranty of fitness for a particular purpose; (4) breach of common law warranty of services; and (5) negligence. Laidlaw sought recoupment of the fines imposed by the EPA as well as attorney’s fees in connection with negotiation process and lost profits resulting from the constant disrepair of defendant's machine.

In response to the complaint, Honeywell filed a motion for summary judgment.

Trial Court Proceedings
At trial, the district court's first task was to determine whether Laidlaw’s contention that the contract it executed constituted an “offer” not an acceptance. In arriving at its decision, the court looked at Laidlaw’s conduct surrounding the negotiation and contracting process. The court determined that in signing and returning the contract to Honeywell that the parties assented to after lengthy negotiations, Laidlaw showed its willingness to enter into the agreement. Therefore, Laidlaw’s contention that the signed contract was their “offer” to buy the product, not their acceptance of Honeywell’s proposal was without merit.

Second, the district court evaluated Laidlaw’s contention that the letter written to Laidlaw by Honeywell’s senior counsel created a new contract. The court determined that there was no evidence that the purchase order sent to Laidlaw was ever “accepted” or understood to be an offer and that the only contractual terms would be those found in the original contract for purchase to which Honeywell’s acknowledgment letter referred.

The court reasoned that Laidlaw’s theory disregarded the fact that Laidlaw performed pursuant to the written contract, not the purchase order. Therefore, it naturally followed that the written contract, which was borne out of weeks of negotiations between Honeywell and Laidlaw, would govern the relationship between the parties.

Once the court determined that the initial written contract controlled the relationship, the final question to be determined was whether Laidlaw could avoid the terms of the contract due to ambiguity or unconscionability of the terms. The court found that the contract’s terms were in no way ambiguous; rather Honeywell’s limitations of liability and disclaimers of warranty were state in plain terms. Further, the contract still allowed Laidlaw some form of remedy for damages that were beyond incidental, consequential, or special.

Finally, the court looked at whether the terms of the contract were unconscionable so as to allow Laidlaw to avoid being bound by the agreement. In reaching its decision, the court found that both Honeywell and Laidlaw were both sophisticated parties, conducting arms-length negotiations with the benefit of being represented by counsel. Since these three elements were present, the court found that no element of surprise regarding the limitation of remedies or [warranty disclaimer]]z could exist. Since the court determined that there was no “unfair surprise,” Laidlaw could not avoid enforcement of the contract on the grounds of unconscionability.

Honeywell’s motion for summary judgment was granted.