Fairbanks, Morse & Co. v. CONSOLIDATED F. CO., Civ. No. 1221.

CourtUnited States District Courts. 3th Circuit. United States District Court (Delaware)
Citation94 F. Supp. 311
Docket NumberCiv. No. 1221.
Decision Date20 November 1950

94 F. Supp. 311


Civ. No. 1221.

District Court of the United States D. Delaware.

October 25, 1950.

November 20, 1950.

94 F. Supp. 312
94 F. Supp. 313
James R. Morford and Edward W. Cooch, Jr., (of Morford, Bennethum, Marvel & Cooch), of Wilmington, Del., for plaintiff

S. Samuel Arsht (of Morris, Steel, Nichols & Arsht), of Wilmington, Del., and Leonard J. Schwartz, and J. Victor O'Brien (of Fox, Rothschild, O'Brien & Frankel), of Philadelphia, Pa., for defendant.

Memorandum for Order.

LEAHY, Chief Judge.

The present motion for summary judgment involves plaintiff's first cause of action on 29 promissory notes for $48,140.00 plus interest and counsel fees, out of a total of 36 similar notes all of which have matured. Failure of consideration is the defense. The 36 notes for $59,760.00 were part payment of a diesel engine and generating equipment purchased by defendant under a contract of January 8, 1948. The alleged failure of consideration results because this equipment was not the kind of equipment which plaintiff had expressly agreed to deliver to defendant. There is a claim for breach of warranty in that (Answer): "At the time of the purchase of the equipment the plaintiff represented and expressly and impliedly warranted that the equipment was fit for the purpose for which the equipment was purchased by the defendant, that is, for the generation and supply of electric power in varying quantities as and when required by the defendant up to 1136 kilowatts. Contrary to the representations and to the express and implied warranties, the equipment, by reason of its inadequate and faulty design and construction, did not and does not now satisfactorily develop electric power in varying quantities up to 1136 kilowatts as required by the defendant."

Defendant, filing a counterclaim asserting an affirmative cause of action against plaintiff arising out of the same facts, alleges the equipment sold and delivered by plaintiff to defendant "by reason of the inadequate and faulty design and construction, did not and can not now produce electric power in the amount required by defendant from time to time up to 1136 kilowatts." Because of the alleged breach of warranty, defendant claims damages in the amount that it paid on account of the purchase price and certain special damages.1

Plaintiff has moved for summary judgment on the first cause of action and on defendant's counterclaim. The pertinent portions of the contract between the parties are in three parts and are set forth in the margin.2 Defendant says the equipment

94 F. Supp. 314
was described briefly in the Proposal as follows

"1—1420 KVA—1136 KW at 80% P.F. 3 Phase 60 cycle, 2400 volt, 720 RPM Direct Connected Generator".

94 F. Supp. 315

And in Specification No. One the Generator is described as: "1 — 1420 KVA — 1136 KW at 80% Power Factor, 3 Phase, 60 Cycle, 2400 Volt, 3 wire, 720 RPM, 50° Rated Fairbanks, Morse Alternator with Sole Plates, Rheostats and Field Discharge Resistor".

Defendant interprets the quotes to mean plaintiff, by the terms of the agreement, had agreed to deliver equipment "for the generation and supply of electric power in varying quantities as and when required by the defendant up to 1136 kilowatts" and claims that by reason of its inadequate and faulty design and construction, the equipment did not and does not satisfactorily develop electric power in varying quantities up to 1136 kilowatts.

The contract further provides the plaintiff-seller shall not be obligated, liable or accountable upon any guaranty or warranty, express or implied, statutory or otherwise, "in any manner or form beyond its express agreements relative to the determination of the capacity of each Diesel engine at the factory test, the determination of successful operation of the machinery at a specified test, and the replacement of defective guaranteed parts, all hereinbefore specifically set forth." After delivery and installation defendant accepted the equipment in accordance with the terms of the contract. This acceptance by defendant is found as follows:

"Consolidated Fisheries Company Manufacturers of Fish Products Lewes, Delaware "June 19, 1948 "Fairbanks Morse & Co New York City "Gentlemen: — "This is to advise that 1600 HP Generator and Engine have been installed and are operating in a satisfactory manner and personnell instructed in its operation "Very truly yours "Consolidated Fisheries Co "R. C. Hayes"

A close reading of the record in the case at bar fails to disclose that notice of any kind was ever sent by defendant to plaintiff to the effect that the equipment purchased by defendant did not meet the claimed requirements. Certain it is that no such notice is pleaded, relied on or contained in any writing before me. Defendant, however, admits giving the acceptance but says it was given in reliance upon representations made by a certain employee of plaintiff and that in any event the acceptance is not material to the issue in this case. The defense and counterclaim asserted by defendant is not based on any implied warranty. On the contrary, defendant argues plaintiff's undertaking is an express warranty to deliver equipment which will produce "1136 KW at 80% P.F. 3 Phase."

On the basis of the facts, plaintiff claims, however, it is entitled to summary judgment because defendant is relying upon

94 F. Supp. 316
warranty of fitness of the equipment to deliver up to 1136 kilowatts and such reliance is rendered unavailing by the express terms of the contract between the parties where it deals with both implied and express warranties. Plaintiff also urges that the representations supposedly made by Anderson3 and the statements made in connection therewith according to Hayes, are irrelevant to any issue of the case for the purpose of plaintiff's motion, and even if they were relevant they, too, would be rendered unavailing under the express terms of the contract as well as the parol evidence rule. Plaintiff argues that the guaranties and warranties specifically assumed and made exclude any such warranty as urged by defendant, whether it be express or implied, not so assumed by plaintiff as shown by the other clauses of the contract — in particular, General Engine Proposal, par. 4, 6, and specifically par. 7, which provides the proposal shall become "the entire and sole agreement of the parties pertaining to the subject matter thereof" * * * "mutually withdrawing, cancelling, or otherwise waiving, terminating and excluding any and all oral, written, express or implied representation, guaranties, warranties, agreement or understandings whatsoever not set forth in full herein or in the General Provisions or Specifications made a part hereof." (Emphasis supplied.)

Finally, plaintiff points out that regardless of whether there was a breach by it which might be said to constitute failure of consideration, still defendant was under a duty to give notice to that effect to plaintiff within a reasonable time after installation and operation and since defendant has failed to give notice within a reasonable time its present defense is totally unavailing.

Defendant's single contention, as stated before, is that it does not rely at all on any theory of implied warranty, but that there has been a failure of consideration because the equipment delivered failed to comply with the express terms of the agreement. In so claiming it says whether the equipment did comply with the agreement raises a material fact issue and that consequently the motion for summary judgment should be denied. After reviewing the entire record before me I cannot accept this view. I conclude plaintiff's motions for summary judgment should be granted.4

1. There are, at bottom, two questions. The first is whether the plaintiff-seller did warrant the equipment to develop "up to 1136 KW" by implication of law.5 Here, the contract not only specifically

94 F. Supp. 317
states it is "the entire and sole agreement of the parties" but also expressly and positively excludes implied warranties6 in at least six instances: (a) General Engine Proposal, Paragraphs 4, 6 and 7; and (b) Standard General Provisions, Paragraphs II C (1), III and VI. In this respect, Pargaraph II C (1) which relates to "Test for successful operation according to Guaranties of Duty" appears vital for it states "The Company (plaintiff) makes no guaranty or warranty of operation or efficiency except such Guaranties of Duty as may be stated in the Proposal * * *", which, it is clear, relates to fuel guaranties. Moreover, the oral representations alleged to have been made by plaintiff's engineer Anderson at the time defendant accepted the installation and operation of the equipment are not relevant to the issue presented here for such allegations,7 appearing in the Hayes affidavit, even if material, must be ignored as incompetent and not admissible evidence under both the express terms of the contract of sale and the parol evidence rule. The acceptance of the equipment, on the other hand, was itself a part of the written contract8 and contemplated as such
94 F. Supp. 318
by the parties; hence, it cannot be varied or altered by alleged parol statements made prior to the time the acceptance was given. Defendant failed to request a test then, as it could have under Paragraph 11(c) 1 of the Standard General Provisions and thus, it seems to me, it waived any guaranty of duty.9 That particular paragraph, by its specific terms, provided "If such a test is not requested by the Purchaser, or if, for any reason, other than the fault or neglect of the company or its Engineer, such test is not properly conducted promptly as aforesaid, all Guaranties of Duty shall be null and void, and the Purchaser shall give to the Company's Engineer or other representative, on demand, a written acceptance of the equipment as properly fulfilling the requirements of...

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