US FOR USE AND BEN. OF CRANE CO. v. PROG. ENTER., INC., Civ. A. No. 75-125-NN.

• Decision Date: 23 August 1976
• Docket Number: Civ. A. No. 75-125-NN.
• Citation: 418 F. Supp. 662
• Parties: UNITED STATES of America for the Use and Benefit of CRANE COMPANY, t/a Cochrane Environmental Systems, an Illinois Corporation, Plaintiff, v. PROGRESSIVE ENTERPRISES, INC., and Fidelity and Deposit Company of Maryland, Defendants.
• Court: U.S. District Court — Eastern District of Virginia

418 F. Supp. 662

UNITED STATES of America for the Use and Benefit of CRANE COMPANY, t/a Cochrane Environmental Systems, an Illinois Corporation, Plaintiff, v. PROGRESSIVE ENTERPRISES, INC., and Fidelity and Deposit Company of Maryland, Defendants.

Civ. A. No. 75-125-NN.

United States District Court, E. D. Virginia, Newport News Division.

August 23, 1976.

Stuart L. Nachman, Steingold, Steingold & Friedman, Norfolk, Va., for plaintiff.

Alvin B. Fox, Ellenson, Fox & Wittan, Inc., Newport News, Va., for defendants.

OPINION AND ORDER

CLARKE, District Judge.

This action was brought to recover the unpaid balance allegedly due for the purchase of a cast iron deaerator supplied by the plaintiff, Crane Company hereinafter referred to as "Crane", to the defendant, Progressive Enterprises, Inc. hereinafter referred to as "Progressive" to be installed as part of defendant's contract with the United States. Jurisdiction of the District Court is based upon the Miller Act, 40 U.S.C. § 270b(a) and (b).

The material facts of the case are not in serious dispute. Plaintiff, on May 3, 1974, submitted a written proposal to furnish the machine to defendant for $5238.00, the price quoted as firm for acceptance within fifteen days. After the expiration of the fifteen-day period, Progressive submitted its bid dated June 7, 1974, for the government contract without arranging for an extension of the fifteen-day period. Progressive was awarded the government contract on June 14, 1974. Shortly thereafter, on June 17, 1974, Progressive verified the continued effectiveness of the quoted price for a thirty-day period. On July 1, 1974, Progressive accepted the offer to sell by submission of a purchase order. (The price agreed to at that time was $5217.00 because of the exclusion of a part included in the original price quotation.)

Crane, through its authorized selling agent, Hawkins-Hamilton Co., advised Progressive that "because of rapidly escalating material costs, your purchase order can only be accepted subject to current price in effect at time of shipment." This communication went on to quote a current price of $7350.00.

The parties agree that the July 1, 1974 purchase order was an effective acceptance of Crane's offer to sell. However, apparently without protest to or discussion with Crane or its agent, Progressive agreed to the higher price and, on August 7, 1974, submitted a second purchase order for the machine, this time at $7350.00. Thereafter, the machine was delivered and Progressive paid $5,550.88 and asserted the balance not to be due because the increased price was not a valid modification of the contract. Crane then instituted this suit to recover $2,218.32 plus interest from March 2, 1975, representing the difference between the higher agreed price with interest and the amount paid by the defendant.

Crane contends that Progressive acquiesced in the increased price and that the August 7, 1974, purchase order effectively modified the existing contract. Section 2-209 of the Uniform Commercial Code (Virginia Code § 8.2-209) provides:

(1) An agreement modifying a contract within this Article needs no consideration to be binding.

This change from the common law of contracts supports the common business practice of adjusting the terms of agreements as conditions change.

The ability to modify a sales agreement is limited by the general U.C.C. requirement of good faith.¹ Official Comment 2 to § 2-209 clearly expresses this requirement and elaborates on its meaning in the context of contract modifications:

The effective use of bad faith to escape performance on the original contract terms is barred, and the extortion of a "modification" without legitimate commercial reason is ineffective as a violation of the duty of good faith. Nor can a mere technical consideration support a modification made in bad faith.

. . . But such matters as a market shift which makes performance come to involve a loss may provide such a reason even though there is no such unforeseen difficulty as would make out a legal excuse from

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