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March 5, 1979


The opinion of the court was delivered by: BARTELS

Plaintiff, Nederlandse Draadindustrie NDI B.V. ("NDI"), is a Dutch manufacturer of steel strand ("strand"), and defendant, Grand Pre-Stressed Corporation ("Grand"), is a domestic manufacturer of pre-stressed concrete, of which strand is a component. In this diversity action, plaintiff seeks damages in the amount of $ 263,069.51 together with interest and costs for breach of a contract for the sale of approximately 1180 metric tons of steel strand to defendant. The sum claimed represents deficiencies allegedly due both for strand (a) delivered by plaintiff and accepted by defendant and (b) contracted for but which was rejected by defendant and was either sold to third parties or not produced at all. Defendant denies liability under either claim and asserts a counterclaim in the amount of $ 1,275. *fn1" The case was tried without a jury, two witnesses being called by plaintiff and none by defendant. After considering the testimony and numerous exhibits, the Court has reached the conclusions set forth in the following opinion which constitutes its findings of fact and conclusions of law.


 The Contract

 On May 2, 1975, the parties executed a written agreement for the sale of 5,000,000 linear feet (U.S.) of one-half inch steel strand, amounting to approximately 1180 metric tons, at a cost to defendant of $ 159 per thousand feet, C.I.F. New York, excluding duty, and to be furnished by plaintiff according to the following schedule over a seven-month period:


 As stated in the preamble to the agreement, defendant was intending to use the strand as a component of pre-stressed concrete piles required for the construction of a sewage treatment plant at Syracuse, New York. Paragraph 3(f) of the agreement specified that payment was to be made by defendant on the 15th day of the month preceding the month of each delivery, and paragraph five required plaintiff to furnish to defendant both a performance bond and a labor and materials bond, each in the amount of $ 800,000. Any amount paid as premiums for the bonds by plaintiff was to be reimbursed by defendant within 30 days after submittal of an invoice. Paragraph six provided that the agreement was to be construed according to the law of New York.

 Between early June and mid-September of 1975, plaintiff made five shipments to defendant. The first delivery, invoiced on June 4, 1975 and composed of 400,000 linear feet of strand, was made upon receipt by plaintiff of advance payment in the amount of $ 61,056. When this shipment arrived at its destination in Syracuse, defendant found that eighteen of the 32 coils of strand shipped had unraveled, perhaps in transit after delivery by plaintiff to the shipper. Defendant notified plaintiff of the defect, whereupon plaintiff agreed, after inspecting the coils at Syracuse, to issue to defendant a credit for the cost of the coils, which it did in February 1976 upon receipt of the eighteen coils in Holland. At the same time, plaintiff agreed to ship sixteen replacement coils "on open account," but with the understanding that payment would be forthcoming after acceptance of the replacement coils by defendant. Though subsequently defendant accepted this second shipment which plaintiff invoiced on June 30, 1975, defendant never made payment.

 Because of cash flow difficulties on the part of defendant which made infeasible the prepayment required by the contract, no shipments were made through mid-August 1975. Nevertheless, pursuant to telephone requests by defendant's general manager, Robert Curtis, to plaintiff's managing director, William Schwartz, seeking further shipments on open account waiving prepayment, plaintiff made two further deliveries invoiced on August 25 and September 9 of six and eighteen coils respectively. Defendant accepted both without complaint, but has to date failed to pay plaintiff for either of them.

 A fifth and final shipment was made in mid-September and invoiced on September 16, but only after plaintiff had insisted upon and received assurance of prompt payment of $ 40,000 for the 24 coils included in this last delivery, which payment was received by plaintiff on September 19. On September 22 plaintiff submitted its final invoice covering $ 8,000 representing premiums paid by it to secure the two bonds provided for under paragraph five of the agreement.

 During October and November 1975, plaintiff's director Schwartz had several conversations with defendant's general manager both by telephone and in person during the course of which it became evident and Curtis subsequently confirmed that defendant had been purchasing strand from another supplier, American Spring Wire of Cleveland, Ohio, upon terms which permitted deferred payment at least 60 days after shipment, rather than in advance as required by defendant's contract with plaintiff. In consideration of the falling market price of strand generally and of the large amount of strand already produced by plaintiff pursuant to the contract, Schwartz offered to modify the agreement in two respects: first, by permitting deferred payment by letter of credit at 60 days, and second, by reducing the price per thousand feet from $ 159 to $ 149. This offer was reaffirmed in a mailgram to defendant in early December and again in a letter dated December 23. To this proposal plaintiff received no reply.

 In April 1976, Schwartz made a final attempt to salvage the contractual relationship between plaintiff and defendant when, accompanied by his counsel, he met with Curtis and defendant's Vice President, Walter Conlon, at defendant's offices in Deer Park, Long Island. He was informed by Conlon, however, that Conlon had no authority to receive shipment of any further strand from plaintiff under the contract. Schwartz' attempts to contact defendant's President, Vincent DeLillo, or his father, Andrew DeLillo, were unsuccessful.

 Thus, at the time of this first communication to plaintiff by defendant of its firm intention not to honor the terms of the May 1975 agreement, plaintiff had made five shipments, totalling 96 coils, and had submitted six invoices totalling $ 193,947.86, including the $ 8,000 in bond premiums. *fn3" Defendant, on the other hand, had made only two payments, totalling $ 101,124, but it had received from plaintiff in February 1976 a credit in the amount of $ 34,890.83 for the eighteen defective coils returned from the initial shipment. These amounts subtracted from the six invoices submitted by plaintiff resulted in an unpaid balance on strand delivered by plaintiff and accepted by defendant including the amount of unreimbursed bond premiums of $ 57,960.03. Of the approximately 1180 metric tons of strand provided for by the contract, defendant had accepted only 221.113 tons and had repudiated the remaining 958.887 tons, of which 317.891 tons had already been produced by plaintiff in anticipation of its obligations under the agreement.


 Plaintiff's Production Capacity and ...

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