The plaintiff contracted with the defendant to produce two million recipe brochures for the defendant’s pizza promotional project. The parties exchanged price quotations and a purchase order reflecting the agreement. The plaintiff’s price quotations contained an additional terms provision requiring interest and attorney’s fees in the event of late payment. A dispute arose concerning the amount due under the contract, and this litigation ensued. Following a bench trial, the district court ruled in favor of the plaintiff, but did not award attorney’s fees. Both parties appealed. For the following reasons, we affirm the judgment of the district court.
I
BACKGROUND
A. Facts
Boboli Co. (Boboli) produces thick “California style” pizza bread shells (pizza bread) for sale in supermarkets and for use in restaurants. Boboli decided to introduce its pizza bread into Southern California supermarkets. To promote this introduction, Boboli decided to insert folded brochures containing suggested recipes in the plastic package with the pizza bread. Given its limited promotional budget, Boboli decided not to overwrap each brochure in polypropylene plastic, a method of shielding the brochures from the oil and grease of the fresh pizza bread. In the summer of 1987, Boboli engaged the Highland Group, Inc. (Highland), a marketing and sales promotion agency, to design and produce the brochures.
Because the brochures would be in contact with food, federal law required that they be produced with non-toxic inks approved by the Food and Drug Administration (FDA inks). In November 1987, Sydney Griffin, Highland’s production manager, discussed the printing of the brochures with several paper and ink suppliers, including Colorcon, Inc. (Colorcon), an FDA ink manufacturer. Griffin explained to Colorcon that the brochures would be placed on a pizza dough product. Colorcon replied that FDA inks may smear in such application and offered to test Colorcon’s inks on the Boboli pizza bread. Neither Griffin nor any other Highland employee, however, accepted Colorcon’s offer to test the FDA inks. Colorcon also recommended *1198 Comark Merchandising, Inc. (Comark), as a quality printer of FDA ink materials.
Griffin approached Kenneth Kroslak, a Comark sales representative, to obtain a price quotation for printing the brochures. Griffin explained to Kroslak that the brochures were to be used in connection with a new pizza product, but refused, when Kros-lak asked for additional details, to identify further the nature of the product, the conditions under which the brochures would be packaged with the product, or the name of the company producing the product. Griffin informed Kroslak that she had researched the brochure project carefully by discussing the project with ink and paper manufacturers, and was simply looking for a printer to produce a quality job satisfying her specifications. Kroslak replied that, because of the nature of FDA inks, Co-mark desired to know, prior to production, how materials printed with FDA inks will be used. He also indicated that overwrap-ping the materials often should be considered. Griffin again refused to provide further information. Sensing that he could lose Highland’s business if he pressed the issue, Kroslak did not insist on additional information.
In several subsequent conversations, Kroslak provided Griffin with various price quotations for printing the brochures on different types and weights of paper. On November 23, 1987, Comark sent Griffin, at Kroslak’s direction, a price quotation, on Comark’s standard sales quotation form, for production of either two million or three million brochures on FDA-approved 100 pound coated text paper. Such paper, however, is unsuitable for direct contact with food because it is not water, oil, or grease resistant and thus tends to bleed or smear when it touches those substances. Thereafter, Kroslak and Griffin discussed quotes for printing the brochures on oil and grease resistant (OGR), or water, oil, and grease resistant (WOGR) paper. During these discussions, Kroslak remained uninformed as to the brochure’s intended use. During this time, Griffin also requested and received samples of Planters Popcorn coupons, which were printed by Comark on WOGR paper with FDA inks. Griffin and Highland’s vice-chairman were pleased with the appearance and quality of the coupons and forwarded some of the coupons to Boboli. Boboli in turn placed several coupons in packages of its freshly baked pizza bread to determine whether the coupons would warp or absorb grease. Neither problem occurred.
In late December 1987, after further discussions, Kroslak and Griffin agreed that the brochures would be printed on fifty pound WOGR paper. On December 23, 1987, at Kroslak’s direction, Comark sent Griffin a second price quotation listing those specifications and a $61,420 base price for production of two million brochures. Both this quotation and the prior November 23, 1987 quotation from Comark to Highland simply listed the job as a “recipe brochure” project, without mentioning Boboli, because Griffin had not yet told Kroslak that Highland’s client was Boboli. Moreover, after sending the December 23, 1987 price quotation, Comark received Highland’s brochure artwork; the artwork text did not describe whether the pizza bread was fresh or frozen.
The reverse side of Comark’s December 23, 1987 price quotation contained the following terms:
ADDITIONAL TERMS: Your acceptance of the terms of this Quotation also constitutes your acceptance of the following conditions:
1. If your account is not fully paid within sixty (60) days after the date of any invoice for work performed pursuant to this Quotation, you will be charged interest at the rate of one and one-half percent (11/2%) per month until the account has been fully paid.
2. In the event that Cooperative Mar-ketings[ 1 ] shall institute any collection proceedings against you with respect to your delinquent account, then you agree to pay to Cooperative Marketing on demand, an amount which is equal *1199 to all costs, charges and expenses paid or incurred by Cooperative Marketing in pursuing such collection, including, without limitation, all reasonable attorney’s fees, court costs and other litigation expenses in connection therewith.
On January 4, 1988, Griffin sent Comark a purchase order requesting production of the brochures for a base price of $61,420 on more expensive seventy pound WOGR paper, and with additional color. After numerous negotiations, Kroslak and Griffin agreed that Comark would produce the brochures on the heavier seventy pound paper and with additional color for the same base price quoted for the fifty pound WOGR paper, notwithstanding the additional cost to Comark. In late January 1988, again at Kroslak’s direction, Comark sent Griffin a third price quotation confirming the final brochure specifications and the base price of $61,420. This January 27, 1988 price quotation also contained the same additional terms and conditions as the December 23, 1987 price quotation above. 2
In late January 1988, Comark shipped an initial group of 72,000 brochures to Boboli. Boboli in turn packaged 20,000 to 35,000 brochures with its pizza bread and shipped thousands of them to supermarkets for sale. Soon thereafter, a consumer informed Boboli that a red mark appeared on the pizza bread where a brochure had been placed. Subsequent inspection revealed that other pizza bread experienced the same problem. Boboli decided to cease packaging the brochures with the bread and informed Highland of the consumer’s complaint. Highland in turn contacted Co-mark and, for the first time, informed Co-mark of Boboli’s exact packaging process and of its plan to place the brochures in direct contact with freshly baked pizza bread. Kroslak told Griffin that, had he known this, Comark would not have produced the brochures without overwrapping each brochure in polypropylene plastic; Griffin responded that Boboli’s limited budget had prohibited overwrapping.
After determining that overwrapping was the only certain way to cure the problem, Kroslak offered to have Comark over-wrap each brochure. Kroslak informed Griffin, however, that Comark would not bear the cost of the overwrapping, because Comark had fulfilled satisfactorily its responsibility to produce quality brochures. He reminded Griffin that she had refused to inform Kroslak of the nature of the Boboli pizza product and the manner in which the brochures would be packaged with that product. After this conversation, Griffin directed Kroslak to overwrap the brochures. The remaining brochures were overwrapped and sent to Boboli without further incident of bleeding. Comark had the nearly two million brochures over-wrapped by an outside vendor at a cost of $16,651.
Subsequently, a dispute arose between Highland and Comark over the amount due under the brochure contract. Since March 1988, Highland has conceded that it owes Comark at least $55,220 for the brochures, but has refused to pay that amount because Comark asserts that Highland owes more. On June 6, 1988, Comark filed this diversity action against Highland for the amount due under the contract. The district court awarded Comark $86,960, plus prejudgment interest. The court did not, however, award attorney’s fees as requested by Comark. Comark appealed, challenging the court’s denial of attorney’s fees. Highland cross-appealed, contesting the judgment against it.
B. District Court Opinion
The court held that Highland had agreed to pay Comark for producing approximately two million brochures and for the subsequent overwrapping cost.
See
Mem.Op. at 16-17 (opinion also available on Westlaw
The court next addressed the issue of warranties. It held that any express warranty in connection with the Planters Popcorn coupons was met: the coupons provided a fair sample of FDA ink printing on OGR paper and were of the quality of the recipe brochures that Comark eventually produced. See id. at 18. Moreover, the court determined that Comark complied with the implied warranty of merchantability. The court relied on the language in paragraph 2-314(2)(a), (c) that goods are merchantable when they pass without objection in the trade under the contract description and are fit for the ordinary purpose for which the goods are used. See id. at 18-19. Finally, the court concluded that no implied warranty of fitness for a particular purpose arose under paragraph 2-315 because Comark was unaware of the particular purpose for which the brochure would be used and because Highland did not rely on Comark’s skill or judgment to furnish appropriate brochures for Boboli’s specific packaging process. See id. at 19.
II
ANALYSIS
A. Standard of Review
This appeal presents challenges to the district court’s attorney’s fees and implied warranty of merchantability rulings. The court’s conclusion that the attorney’s fees clause materially altered the contract “is a question of fact to be resolved by the trial court, and thus we will overturn the court’s conclusion only if clearly erroneous.”
Luedtke Eng’g Co. v. Indiana Limestone Co.,
B. Attorney’s Fees
The parties do not dispute that Illinois law controls or that the U.C.C. governs this case. 4 Paragraph 2-207 of the U.C.C. states in relevant part:
(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:
(a) the offer expressly limits acceptance to the terms of the offer;
(b) they materially alter it; or
(c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
Ill.Rev.Stat. ch. 26, para. 2 — 207(1)—(2) (emphasis supplied).
The narrow question presented is whether the district court clearly erred when it found that the attorney’s fees clause on the reverse side of Comark’s written confirmation (the January 27, 1988 price quotation) materially altered the contract and therefore did not become part of the contract between the parties. We pursue this inquiry by reviewing the record evidence in light of the standards of paragraph 2-207(2)(b).
5
Our research has disclosed no Illinois case that has addressed this precise issue. Nevertheless, as this court has noted previously, in assessing what is a material alteration, Illinois courts look to the commentary to paragraph 2-207 for guidance.
See Schulze & Burch Biscuit Co. v. Tree Top, Inc.,
The district court’s ruling rested on the rationale that the inclusion of an attorney’s fees clause was an unreasonable surprise to Highland, a point Comark strongly contests.
6
Initially, we note that Highland bore the burden of proving that the attorney’s fees clause materially altered the contract. As between merchants, paragraph 2-207(2)(b) presumes the inclusion of the additional clause unless one of the three exceptions is met. Therefore, as the party opposing such inclusion, Highland bore the burden of proving the exception.
See Dale R. Horning Co. v. Falconer Glass Indus., Inc.,
Comark contends that the district court improperly shifted the burden of proving the absence of material alteration by requiring it to introduce evidence of a preponderant industry custom and usage of attorney’s fees clauses. We cannot accept this characterization of the record. In determining whether Highland was surprised by the inclusion of the attorney’s fees term, the district court attempted to consider evidence of customary industry usage of such a term. Commenting on the issue at the close of trial, the district court stated, “there was no showing by the parties of the prevalence of the common nature of the attorney’s fees clauses.” Tr. of Dec. 13, 1989 at 16 (emphasis supplied). In our view, this remark does not evidence that the district court shifted the burden to Co-mark. It was quite natural for the court to express its puzzlement that a rather major consideration had not been addressed. We also note that, in an oral ruling on Co-mark’s motion for reconsideration, the district court said:
I am not inclined to address and I don’t think I did address in my original ruling the issue of hardship with respect to the term calling for attorney’s fees in this case. I just do not believe Comark has shown that providing for attorney’s fees involved in the collection of the accounts is either an industry custom or an established course of dealing between the parties.
Tr. of Jan. 16, 1990 at 3. We are not convinced that this statement, when read in context, evidences a misconception on the part of the district court with respect to the ultimate burden of proof on this issue at trial. The remark was made immediately after the district court had noted that, in
Schulze,
In denying Comark’s motion for reconsideration, the court did not exclusively rely on the absence of industry usage. It also observed that there was no “established course of dealing between the parties” and that this dispute arose out of “essentially one transaction.” Tr. of Jan. 16, 1990 at 3-4. Indeed, this transaction was the first between the parties, and Highland received only two price quotations that contained the additional attorney’s fees term.
7
Thus, this transaction was not one involving parties familiar with the other’s forms, terms, and practices. Lack of prior dealing is an important factor to consider in determining the existence of unreasonable surprise.
See Barliant v. Follett Corp.,
Comark argues that Highland had to be aware of the attorney’s fees clause because its own invoice to Boboli provided an additional term for interest. The inclusion of a term for interest charges in Highland’s own invoice, however, does not lead automatically to the conclusion that Highland was aware of an attorney’s fees clause contained in Comark’s confirmation. The district court specifically found that Highland did not include any term for attorney’s fees in its forms to customers. This finding supports the conclusion that Highland was surprised to find that in fact Comark included such a term. Attorney’s fees and interest terms are treated differently under the Code. The commentary provides that a term for interest on overdue invoices is an example of a clause that would not involve an element of surprise. See Ill.Rev.Stat. ch. 26, para. 2-207 comment 5. On the other hand, a term for attorney’s fees is not mentioned, and courts tend to analyze them on a case-by-case basis. 8
The district court’s finding that the inclusion of the attorney’s fees clause would materially alter the contract was not clearly erroneous.
C. Implied Warranty of Merchantability
In Illinois, “if the seller of goods is a merchant of goods of the kind being sold, a warranty that the goods are ‘merchantable’ is implied into a contract for their sale as a matter of law, unless otherwise expressly excluded or modified.”
Bethlehem Steel Corp. V. Chicago E. Corp.,
Goods to be merchantable must be at least such as:
(a) pass without objection in the trade under the contract description; and
(c) are fit for the ordinary purposes for which such goods are used.
Ill.Rev.Stat. ch. 26, para. 2-314(2)(a), (c).
Comark is a merchant of the recipe brochures sold to Highland and did not disclaim the implied warranty of merchantability. Highland bore the burden of proving breach of the implied warranty of merchantability. In Illinois, the affirmative defense of breach of implied warranty “must be pleaded and proved by a preponderance of the evidence by the party relying on it.”
Abatron, Inc. v. Fulton Contracting Co.,
For similar reasons, Highland’s alternative argument that the brochures were unmerchantable because they were unfit for the ordinary purpose for which they were used is unconvincing. Highland presented no evidence to establish that, in order to pass without objection in the trade, brochures printed with FDA inks must be suitable for direct contact with freshly baked, hot, greasy pizza bread. Indeed, Kroslak told Griffin that, if Comark had known of the intended use, it would have insisted on overwrapping the brochures. Moreover, Highland’s suggestion that the brochure’s ultimate use was reasonably foreseeable is disingenuous given Highland’s unwillingness to reveal the nature of the brochure project. We held in
Bethlehem Steel
that “[mjerchantability ... does not look only at the particular use to which the buyer puts the goods.” Rather, “[i]t is ... appropriate to analyze the transaction from the selling merchant’s perspective.”
Conclusion
For the foregoing reasons, we affirm the judgment of the district court.
Affirmed.
Notes
. Comark, a former division of the Cooperative Marketing Co., is the successor in interest to the Cooperative Marketing Co. for all purposes relevant to this appeal.
. The parties dispute whether the reverse side of Comark's November 23, 1987 price quotation contained these additional terms. Apparently, only the face of the quotation was offered and admitted at trial. The district court’s findings of fact state that only the December 23, 1987 and January 27, 1988 price quotations contained the additional terms quoted in the text. We see no reason to disturb that finding.
.
See Dale R. Horning Co. v. Falconer Glass Indus., Inc.,
.
See Gross Valentino Printing Co. v. Clarke,
. Paragraph 2-207(2)(a) does not apply because Highland’s January 4, 1988 purchase order contained no conditions or limitations. Likewise, paragraph 2-207(2)(c) is inapplicable; the district court found that, prior to this litigation, neither Griffin nor any other Highland employee notified Comark that Highland had any objections to the interest or attorney's fees terms.
.We need not address the alternative basis for finding a material alteration — hardship—because we affirm the district court’s finding of material alteration based on the independent ground of unreasonable surprise.
. The court also found no evidence that anyone at Highland ever read the reverse side of the December 23, 1987 or the January 27, 1988 price quotation. Comment 4 to paragraph 2-207 speaks of surprise occurring when a term is included without express
awareness of
the other party. We appreciate that awareness does not necessarily require a party actually to have read the additional term.
See Schulze,
. Comark cites appellate cases that have
affirmed.
rulings that an attorney’s fees clause did not materially alter a contract.
See Mid-S. Packers, Inc. v. Shoney's, Inc.,
. The district court also noted that Griffin’s request for price quotations for brochures printed on OGR or WOGR paper would not necessarily have alerted Kroslak to the brochures’ intended use — such paper and inks often are used with products proximate to, but not touching, food.
