Cloud Corp. v. Hasbro Inc.

Hasbro Inc. (Hasbro) (defendant) sold a toy requiring the use of a packet of a specific powder. Cloud Corp. (Cloud) (plaintiff) mixed and packaged this powder for Hasbro according to a formula developed by Hasbro. Hasbro sent to Cloud a “terms and conditions” form stating that Cloud could not deviate from the terms of the form without Hasbro’s written consent. At some point, the toy began losing popularity and the final purchase orders for the powder were sent to Cloud. Cloud ordered the necessary ingredients for the powder based upon these purchase orders. Before the final purchase orders could be supplied, however, Hasbro provided Cloud with a new formula for the powder, which required less of one of the expensive ingredients, Laponite. Cloud mixed and packaged the powder according to the new formula, but because it had already purchased the Laponite based upon the old formula, it had excess Laponite. Cloud therefore pre-mixed and pre-packaged packets additional to those requested through the purchase orders. Cloud sent an order acknowledgment for the original purchase orders, but included the additional packets as well, despite not having received a purchase order for the additional packets. Hasbro received the acknowledgment, but did not explicitly respond. A Hasbro employee did, however, exchange emails and have phone conversations with Cloud discussing various terms of the agreement. These emails included numbers consistent with Cloud’s order acknowledgment, as did a memorandum written and signed by another Hasbro employee. Hasbro refused to accept delivery of or pay for any of the additional powder. Cloud filed suit for breach of contract. The district judge ruled in Hasbro’s favor. Cloud appealed to the United States Court of Appeals for the Seventh Circuit.