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ROYAL INDEM. CO. v. WESTINGHOUSE ELEC. CORP.

October 15, 1974

ROYAL INDEMNITY COMPANY, Plaintiff,
v.
WESTINGHOUSE ELECTRIC CORPORATION, Defendant


Edward Weinfeld, District Judge.


The opinion of the court was delivered by: WEINFELD

EDWARD WEINFELD, District Judge.

Defendant Westinghouse Electric Corporation ("Westinghouse") moves for summary judgment, pursuant to Rule 56 of the Federal Rules of Civil Procedure, in this action brought by plaintiff as subrogee of Public Service Electric and Gas Company of New Jersey ("PSE&G"). The controversy centers about the breakdown of a turbine generator manufactured by Westinghouse for PSE&G and installed at its Hudson generating plant in Jersey City, New Jersey. Plaintiff seeks to recover $475,800 which it paid to PSE&G, pursuant to the terms of an insurance policy issued in favor of PSE&G, for 127 days loss of use of the generator during the period it was out of service. The complaint alleges the breakdown was the result of defendant's breaches of contract, breaches of warranty, or negligent acts or omissions by Westinghouse in the design, manufacture, installation and testing of the generator. Westinghouse contends that it fulfilled its obligation under its contract with PSE&G by making the repairs without charge to PSE&G; further, that in any event, under the express provisions of the contract, it is not liable for consequential damages which plaintiff seeks to recover in this action. The parties agree that in this diversity suit the substantive law of New Jersey applies. *fn1"

 The following essential facts appear from the affidavits submitted on this motion. After preliminary discussions and correspondence which extended over several years, during which PSE&G received an option to purchase subject to cancellation, Westinghouse, by letter dated November 5, 1964, quoted to PSE&G a price of $10,125,687 for a 600 megawatt generator with stated specifications. That letter specified "[standard] conditions of sale as outlined in [Westinghouse's] Price List 1252 dated September 21, 1964 will apply." Price List 1252 was enclosed in the letter. PSE&G, by letter dated November 13, 1964, accepted the proposal. PSE&G, in its letter of acceptance, specifically noted "[standard] conditions of sale as outlined in your Price List 1252 dated September 21, 1964 will apply," and further, "[the] cancellation clause contained in your proposal of April 5, 1961 is hereby eliminated and this shall be a firm contract." (emphasis supplied.)

 A further exchange of correspondence resulted in an increase in the unit's size to 620 megawatts, other technical changes and a price increase. Westinghouse, in its letter of January 5, 1965, proposing these changes, noted: "[all] other terms and conditions as stipulated in our letter of November 5, 1964 and your letter of November 13, 1964 remain the same." PSE&G accepted the proposal by letter to Westinghouse dated February 18, 1965, and also stated, "[all] other terms and conditions of the contract remain unchanged."

 This exchange of correspondence so clearly defines the contractual relationship of the parties that it borders on the absurd for plaintiff, through its counsel who obviously is without personal knowledge of what transpired between PSE&G and Westinghouse, to argue, as plaintiff does, "that there was no formal contract" between the parties, but merely an option, negotiations and exchange of letters. The day is long past when a red ribbon and seal is required upon documents which contain the terms of the parties' agreements in order to validate such agreements. This agreement was reached after arms length bargaining, emphasized by PSE&G in its letter of November 13, 1964, that "this shall be a firm contract." It is no less firm because the parties did not thereafter sign a formal document containing "whereases" and "the party of the first part" and "the party of the second part." *fn2" The attempt by plaintiff to defeat summary judgment upon its claim that there is an issue of fact as to the existence of a contract between plaintiff's subrogor and Westinghouse is so transparent as to require no further discussion in the light of the documentary proof referred to above. The court finds that Westinghouse and PSE&G concluded an agreement, the terms of which are set forth in the exchange of correspondence referred to above.

 We turn to the provisions of the agreement to consider the respective contentions of the parties. The agreement of the parties contains warranty and limitation of liability provisions, which if enforceable are sufficient to defeat plaintiff's claims for recovery. Price List 1252 contains a warranty by Westinghouse that the equipment shall be free of defects in workmanship or material, and that Westinghouse would, upon notification, correct any non-conformities that appear within one year after completion of shipment or installation. It further provided:

 
"This warranty is in lieu of all warranties of merchantability, fitness for purpose, or other warranties, express or implied, except of title and against patent infringement. Correction of nonconformities, in the manner and for the period of time provided above, shall constitute fulfillment of all liabilities of Westinghouse to the purchaser, whether based on contract, negligence or otherwise with respect to, or arising out of such equipment. [emphasis supplied]
 
Limitation of Liability
 
Neither party shall be liable for special, indirect, or consequential damages. The remedies of the purchaser set forth herein are exclusive, and the liability of Westinghouse with respect to any contract or sale or anything done in connection therewith, whether in contract, in tort, under any warranty, or otherwise, shall not, except as expressly provided herein, exceed the price of the equipment or part on which such liability is based." [emphasis supplied]

 Price List 1252 included by reference the conditions stated in Westinghouse's Installation Services Form 29282B. This provision, applicable to the services of a Westinghouse field engineer in connection with the installation of the unit, provides:

 
"Westinghouse warrants that the recommendations of the Field Engineer shall accurately reflect the best judgment of a qualified engineer in the premises, but no other warranty or obligation of any kind shall extend thereto or be implied therefrom and Westinghouse shall not be liable for any act or omission of those not its employes nor for any injury, loss, damage, delay, failure to operate, or other thing whatsoever due in whole or in part to any cause other than the failure of its engineering recommendations to fulfill such warranty. The liability of Westinghouse with respect to the Field Engineer's services shall not, in any event, exceed the cost of correcting defects in the apparatus, and Westinghouse shall not be liable for consequential damages." [emphasis supplied]

 It is undisputed that Westinghouse made the repairs upon notice to it from defendant and without cost. *fn3" Thus, under the clear and unambiguous provisions noted above, plaintiff's claims are foreclosed.

 Plaintiff, however, seeks to avert the force of these definitive and unambiguous provisions upon a statement by its attorney that "there is no definite evidence that the so-called exculpatory clauses were ever agreed upon and that specific notice thereof was brought home to plaintiff's subrogor." *fn4" To urge, in an effort to create an issue of fact, that these provisions were not "brought home" to PSE&G flies in the face of documentary proof. Plaintiff's subrogor, in its letter of November 13, 1964, specifically identified and referred to Price List 1252 as constituting part of the agreement between the parties. This was an adoption substantially in haec verba of Westinghouse's reference to the list in its letter of November 5, in which the list was enclosed. The salutary purpose of Rule 56 and its requirement that "affidavits shall be made on personal knowledge, [and] shall set forth such facts as would be admissible in evidence," *fn5" cannot be aborted by conjectures of plaintiff's attorney, who is without personal knowledge of the facts and is an incompetent witness on the subject. *fn6" Lawyers for litigants cannot defeat one's right to summary judgment by "superinducing the idea" that a genuine issue of fact exists when one does not exist. *fn7"

 Significantly, plaintiff has submitted no affidavit from any representative of PSE&G who, with knowledge of the transaction, challenges the integrity of the documents constituting the contract between PSE&G and Westinghouse. To the extent, then, that plaintiff argues that it did not agree to the terms referred to in those documents, its argument is foreclosed by the well-settled principle, tempered only by recent applications of the doctrine of unconscionability, "that affixing a signature to a contract creates a conclusive presumption, except as against fraud, that the signer read, understood, and assented to its terms" *fn8" -- or as stated more recently by another court, "in the ...


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