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August 8, 1977

TROPWOOD A.G., and NAVICOM INC., Plaintiffs, against HEMPEL'S MARINE PAINTS, INC., Defendant.

The opinion of the court was delivered by: LASKER



 This is an action for the sale of defective marine paint and negligent application of the paint to the M.V. Tropwood (the Tropwood). Plaintiffs are Tropwood A.G., a Swiss corporation which owns the Tropwood, and Navicom, Inc. (Navicom), a Wisconsin corporation which is, and at all relevant times was, the Tropwood's managing agent and operator. The defendant, Hempel's Marine Paints, Inc. (Hempel Inc. or the defendant) is a New York corporation, licensed by J. C. Hempel/Hempel's Marine Paints of Copenhagen, Denmark, to use certain formulas and trademarks, including the trade name "Hempel's Marine Paints." It is part of a world-wide network of enterprises which manufacture and sell Hempel's Marine Paints.

 Trial to the court without a jury has commenced. After the plaintiffs rested and midway through the presentation of its defense, Hempel Inc. suggested that the record was complete with respect to two issues of contract interpretation it believed to be conclusive in its favor and moved to dismiss the complaint. Because the issues are potentially dispositive of the case, and because what was to have been a two day trial had already ripened into a six day affair, trial was adjourned sine die and the motion taken under advisement. This memorandum constitutes our findings of fact and conclusions of law pursuant to Fed.

 R. Civ. P. 52.

 The Motion to Dismiss

 Hempel Inc. moves to dismiss on two grounds. First, it claims that whatever contractual breach may have occurred in this case was committed not by it, but by one or more of its foreign affiliates, and that it is not legally responsible under the contract for the acts of its foreign affiliates. Second, it argues that even if it is liable for the alleged breach, the extent of its liability under the contract is limited to a warranty of merchantability of the product in container, and the plaintiffs' claims must therefore fail.

 We conclude that the motion must be denied.

 The Factual Background

 On or about January 1, 1970 Navicom entered into a contract with Hempel Inc. for the purchase of paint for three vessels under its management, one of which was the Tropwood. Pursuant to this contract Navicom purchased Hempel's Marine Paints for the three vessels at various shipyards throughout the world. When, in March 1972, the Tropwood proceeded to Rejeka, Yugoslavia for dry-dock, two Hempel's representatives were on hand to consult with regard to the appropriate Hempel brand paints and their application. One was from the newly opened Hempel's Yugoslavian affiliate, Hempel-Umag, and the other was from one of the Hempel organizations in Copenhagen. At this dry-docking the entire bottom and boot top area of the hull were painted.

 Approximately six weeks later, while the vessel was in Santos, Brazil, the master noticed that the paint was not adhering properly. Specifically, he reported that there was extensive peeling in the boot top area. In response to this report, Captain George Carrett, Navicom's Marine Superintendent, flew to Gijon, Spain, where he met the vessel in early June. He determined that another painting was required and arranged for the work to be done at a shipyard in Dunquerque, France. Drydocking, which took place from June 9th to June 12, 1972, was carried out solely for the purpose of repainting. Again, Hempel's representatives were on hand at the yard throughout the work and consulted with both Garrett and yard officials with respect to the proper paints and their application. Both the paint and the advisors were supplied on this occasion by Hempel Peintures Marine France S.A. (Hempel-France).

 Within three weeks of the completion of this work, while the Tropwood was docked in Houston, Texas, the master again noticed that the paint was peeling. Garrett flew to Houston where samples of the paint were taken and sent for analysis. In the meantime the vessel continued trading, calling at ports in South America and Western Europe. In September it arrived in Antwerp, where further samples were taken and tests done. The problem continued to evade solution, however, and Garrett had decided at this point that it would be fruitless to dry-dock and repaint until a solution for, or at least a feasible hypothesis as to the cause of the peeling was found. However, on sailing from Antwerp the Tropwood had a collision in the English Channel which resulted in rather extensive damage to its starboard, and it became necessary to dry-dock for repairs. Accordingly, the vessel was dry-docked in Santander, Spain, on October 9, 1972, and since the ship was out of water, Garrett arranged for a third painting.

 Again, Hempel's was called and supplied both paint and a representative, Jose Antonio Docal, of Pinturas Marinas Hempel S.A.E. (Hempel-Spain). Docal was present at the dry-docking and provided recommendations for the choice of paint, the painting schedule and the surface preparation. The paint job proved to be less than satisfactory to Navicom once more, however, and within a month peeling and chipping were again observed. Since the various laboratory tests had proven inconclusive, Garrett remained reluctant to dry-dock and repaint. The Tropwood continued in operation without new paint for almost a year and a half, ...

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