Contracts II, Pages 763–771

Middletown Concrete Products, Inc. v. Black Clawson Co.

United States District Court for the District of Delaware, 1992

Facts:

Plaintiff, a startup company to make primarily concrete pipe, entered into a series of contracts with Hydrotile, a wholly-owned division of defendant. Under these, defendants agreed to sell plaintiff a machinery system to manufacture concrete pipe, which included the Neptune machine. Plaintiffs learned of the Neptune when defendant's regional sales manager, Mack, visited to discuss the generalities of the pipe-making business. At one meeting, Mack gave Corrado, a shareholder of plaintiff, a brochure containing the rates at which the Neptune could produce various sizes of pipe.

A few months later, plaintiff agreed to purchase an elliptical pipe maker, but at a meeting the next week Carrado and other shareholders expressed their concerns about the Neptune's performance, as it was a new product and its predecessor had had problems. Plaintiff requested that Hydrotile guarantee production rates and buy back the system they were considering purchasing should it not perform satisfactorily. While defendant's representative Haar initially dismissed these requests as "out of the question," he agreed to discuss them with his supervisors. The parties also discussed pipe quality and changeover time.

Later that month, Haar told plaintiff that changeovers could be made in about an hour, but that Hydrotile could not guarantee production levels as they depended upon a number of factors. Plaintiff then said that defendant should find a number that they could guarantee.

A week later, three of plaintiff's shareholders met with Haar, Mack, and Hydrotile's president. Haar gave plaintiffs what Hydrotile considered "Acceptable Performance," although it was lower than what was advertised. Although Hydrotile would not agree to make payment contingent upon these rates, Haar told plaintiff that such performance levels would be guaranteed by Hydrotile.

Based on these performance numbers, plaintiff agreed to the quotations. Each page of the contract said that it was conditional upon the attached terms and conditions and subject to no others whatsoever.

The system was then installed, although plaintiff identified various performance problems with the installed machinery. Included was changeover times of 4–8 hours, pipe being produced at 34 pipes per hour instead of the represented 54 pipes per hour, and the elliptical pipe machine could only make one pipe at a time instead of the two previously agreed to. Hydrotile did not repair or replace machinery to meet the guaranteed speeds.

Plaintiff sued for breach of contract and warranty, and defendant moves for summary judgment on all counts.

Issues:

  • Are the contracts to purchase the machines integrated(the final expression of the parties)?

  • Are the contracts to purchase the machines completely integrated(a complete and exclusive state of the terms of their agreement)?

  • Can the Acceptable Performance Letter be admitted as evidence?

Rule:

A contract is integrated if the parties intended it to be, as determined from all the circumstances, including their language and other conduct.

Reasoning:

  • Plaintiff's experienced businessmen negotiated for months and signed the contracts, each of which excluded other warranties and had a merger clause. They also were reviewed by plaintiff's counsel. This shows that they were the final expression of the parties.

  • The fact that each document says that it "contains the entire agreement" shows that each one is only completely integrated about its terms. It fails to show that the documents cumulatively completely integrated the totality of the terms.

  • The Acceptable Performance Letter contradicts the writings' exclusions of warranties, and therefore the parol evidence rule prohibits evidence to establish it as part of the original contract.

Holding:

  • The contracts were integrated only about the terms each contained.

  • Evidence to establish the Acceptable Performance Letter as part of the original contract cannot be admitted as evidence.

Judgment:

Both motions for summary judgment denied.

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