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CREUSOT-LOIRE INTL., INC. v. COPPUS ENGG. CORP.

August 2, 1983

CREUSOT-LOIRE INTERNATIONAL, INC., Plaintiff, against COPPUS ENGINEERING CORPORATION, Defendant.


The opinion of the court was delivered by: CANNELLA

MEMORANDUM AND ORDER

CANNELLA, D.J.:

 Plaintiff's motion for summary judgment is granted. Fed. R. Civ. P. 56.

 BACKGROUND

 Plaintiff commenced this diversity action alleging breach of contract and warranty. Simply stated, in January 1979, plaintiff purchased five type DG-26 fanmix burners [the "burners"] from defendant for installation in an ammonia plant in Kutina, Yugoslavia. According to plaintiff in February 1981, before the burners were installed, it learned that serious problems developed concerning the operation of similar burners manufactured by defendant in ammonia plants in Syria and Sri Lanka. Thereafter, plaintiff claims it sought reasonable assurances from defendant that its burners would perform satisfactorily. Plaintiff asserts that defendant repudiated its contract by failing to give adequate assurances; thus, justifying plaintiff's revocation and its demand for recission. Plaintiff now moves for summary judgment contending that defendant is liable for the purchase price of the burners plus plaintiff's incidental damages.

 FACTS

 Plaintiff is a wholly-owned subsidiary of Creusot-Loire, S.A. ["Creusot-Loire"], a French manufacturing and engineering concern. Creusot-Loire Enterprises ["CLE"] is a contracting subsidiary of Creusot-Loire. CLE is the project engineer for the ammonia plants in Yugoslavia and Syria. The design process engineer for all three ammonia plants -- Yugoslavia, Syria and Sri Lanka -- is M. V. Kellogg ["Kellogg"], an American engineering firm with affiliated offices in Europe. As design process engineer, Kellogg designated defendant's burners for the auxiliary steam boiler in all three plants.

 In the fall of 1978, plaintiff sent Kellogg's burner specifications to defendant. *fn1" In response, defendant mailed plaintiff both technical specifications and price information on the burners. Defendant expressly warranted that the burners were capable of continuous operation using heavy fuel oil with combusiton air preheated to 260 deg. Centigrade. *fn2" Defendant further guaranteed that this warranty would extend for one year form the start-up of the plant but not exceeding three years from the date of shipment. *fn3"

 After receiving several technical clarifications, on January 3, 1979 plaintiff issued a purchase order for the burners. Subsequently, the purchase order was amended on two occasions to include additional components. Plaintiff paid $175,586 for the burners and additional parts. *fn4" In November 1979, the burners were shipped to Yugoslavia. The Kutina plant originally was scheduled for start-up in 1981, however, for reasons not pertinent to the instant motion, the plant will not be operational until the end of 1983.

 In 1981, after the burners were shipped, plaintiff became aware of operational difficulties with the burners at the Syrian and Sri Lankan ammonia plants. With respect to the Sri Lankan plant, *fn5" it became clear that the burners overheated when using heavy fuel oil with combustion air preheated to 316 deg. C. *fn6" Moreover, as plaintiff later learned, efforts to modify the burners proved futile. Indeed, even when the operating conditions at Sri Lanka were substantially relaxed, *fn7" the burners still failed to function properly. In May 1981, Kellogg terminated defendant's attempts to rectify the problems with the Sri Lankan burners and replaced them with a competitor's burner which apparently satisfied all performance specificaitons.

 In February 1981, plaintiff wrote to defendant expressing its concern that the burners purchased for Yugoslavia, like the Sri Lankan burners, would be unable to perform satisfactorily. In June 1981, defendant told plaintiff that the problems with the Syrian burners were being resolved. Defendant, however, did not inform plaintiff of the difficulties experienced in Sri Lanka. In September 1981, defendant suggested to plaintiff several modifications in the burners. These modifications were necessary to insure that the Yugoslavian operational specifications could be met. Defendant also indicated that plaintiff would be billed for these modifications. *fn8"

 In response, plaintiff demanded proof that the burners delivered to Yugoslavia would satisfy the contract specifications. *fn9" Thereafter, on November 6, 1981, defendant informed plaintiff that it had no experience operating burners under conditions comparable with the specifications for the Yugoslavia plant. *fn10" Defendant suggested, however, that plaintiff consider altering the contract specificaitons with respect to the preheat temperature and tye type of fuel. Defendant did not disclose that the same modificaitons proved unsuccessful in Sri Lanka.

 In December 1981, after Kellogg withdrew its approval for installing defendant's burners, representatives from CLE, Kellogg and defendant met in London. At this meeting, the difficulties with the Sri Lankan burners were discussed. In addition, Kellogg informed defendant that the decision to withdraw prior approval for the Yugoslavian burners was based on the problems encountered at Sri Lanka. *fn11" CLE also requested that defendant take back the burners and refund the purchase price to plaintiff. Defendant declined this request. On December 15, 1981, plaintiff also demanded that defendant take back the burners.

 On December 23, 1981 and again on January 13, 1982, representatives of plaintiff and defendant met in New York.At these meetings, plaintiff stated that it would accept the burners only if defendant provided contractual and financial assurances of performance. Plaintiff requested that defendant extend its contractual guarantee because of a delay in the start-up of the Yogoslavian plant and that defendant post an irrevocable letter of credit ...


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