Union Carbide Corp. v. Oscar Mayer Foods Corp.

United States Court of Appeals, Seventh Circuit947 F.2d 1333 (1991)

Facts

Union Carbide Corp. (Union) (plaintiff) entered into a contract to sell Oscar Mayer Foods Corp. (Oscar Mayer) (defendant) sausage casings. The parties performed under the contract when Oscar Mayer would send in purchase orders and Union would send the casings to Oscar Mayer containing an invoice. The invoices provided an indemnity clause, stating that the buyer would pay the seller all government taxes the seller “may be required to pay.” The price for the casings under the contract included two one-percent sales taxes. A competitor began undercutting Union’s price, claiming that based upon its location its customers only had to pay one of the one-percent sales taxes. Union changed locations and then claimed that its customers, including Oscar Mayer, did not have to pay either of the one-percent sales taxes. Eight years later, the state tax authorities assessed Union $88,000 in back taxes on the sales to Oscar Mayer, and charged $55,000 in interest thereon. Union paid the tax authorities then filed suit against Oscar Mayer for indemnity on the tax liability. The trial court granted summary judgment to Oscar Mayer. Union appealed to the United States Court of Appeals for the Seventh Circuit.

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