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J. BARANELLO & SONS v. HAUSMANN INDUS.

September 9, 1983

J. BARANELLO & SONS, Plaintiff,
v.
HAUSMANN INDUSTRIES, INC., Defendant



The opinion of the court was delivered by: NEAHER

MEMORANDUM AND ORDER

 NEAHER, District Judge.

 Plaintiff J. Baranello & Sons, a New York partnership, instituted this diversity action against Hausmann Industries, Inc., a New York corporation, for damages resulting from an alleged breach of contract. The action was tried without a jury over a three-day period. At the close of trial, and upon cross-motions for judgment on liability, this Court ruled that defendant had indeed breached the contract in question, but reserved decision on damages. Defendant has now moved to reargue the liability issue under Rule 60(b), F.R.Civ.P. For the reasons stated below, which also constitute the Court's findings of fact and conclusions of law, F.R.Civ.P. 52, defendant's motion is denied, and plaintiff is awarded $31,439 plus interest for breach of contract.

 The dispute between the parties arises out of a federally funded, public works project sponsored by the New York State Facilities Development Corporation ("FDC") to refurbish the Suffolk Development Center in Melville, New York, a State institution for the mentally retarded. In October 1976, plaintiff prepared and submitted a bid to perform the general construction work on this project and to provide and install 444 wardrobes in the Center's dormitories. In so doing, it relied on a bid quoted by defendant, a subcontractor, for the fabrication and delivery of the wardrobes. In December 1976, after the FDC awarded the contract to plaintiff as low bidder, plaintiff and defendant began discussing the specific details of the wardrobe subcontract. They exchanged letters setting forth the price and schedule of delivery and establishing the FDC architect's approval of defendant's shop drawings as a condition of their contract. When the architect approved the shop drawings but requested changes, the parties renegotiated their terms. In letters exchanged during April 1977, defendant apparently agreed to build the wardrobes in compliance with all FDC specifications, and plaintiff accordingly agreed to pay a higher price. According to plaintiff, defendant breached this contract in May when it refused to manufacture the wardrobes in compliance with two specific FDC requirements.

 At the trial and on its motion to reargue, defendant claimed it was not in breach of contract, arguing that it never agreed on all the specifications of the wardrobes and hence never had an enforceable agreement. Specifically, defendant argued that the bargaining history demonstrated that its April 1977 letter was not an acceptance, but merely one volley in an ongoing series of negotiations on the specification issue. Alternatively, defendant asserted that its apparently clear acceptance of plaintiff's contractual terms was in fact ambiguous, and when viewed in light of the discussions preceding the April letters, could be construed as encompassing some but not all of the FDC specifications requested by plaintiff in its April letter. Both arguments require close analysis of the events leading up to the April letters.

 A. The Bargaining History

 The relatively uncontested testimony adduced at trial revealed the following. On October 27, 1977, approximately one hour before plaintiff submitted its bid on the FDC contract, defendant phoned plaintiff to bid on the subcontract for the wardrobes. Although defendant had read the published FDC wardrobe specifications, and knew that the FDC required adherence to its specifications, its bid of $104,437 was based on manufacturing the wardrobes according to its standard design. Plaintiff was concerned and questioned defendant about the differences between defendant's specifications and those required by the FDC. According to testimony of plaintiff's agent, which this Court credits, defendant replied that its wardrobe would obtain FDC approval. The only major variation cited was defendant's inability to provide the required polyester molding; no mention was made of other deviations.

 On the same day, but after plaintiff submitted its bid to the FDC, defendant sent plaintiff a signed written confirmation of its bid stating that it would build the wardrobes according to the specifications depicted in an attached brochure. As it subsequently developed, the specifications depicted in defendant's brochure (which, incidentally, did not include the specific type of wardrobe sought by plaintiff) differed from the FDC's requirements on six major points: the grade of fire-retardant material; the style of hinge the removability of panels; the absence of subframes; the substitution of plastic for hardwood drawers; and the absence of the polyester moldings.

 After plaintiff was awarded the FDC contract, agents from both companies met to discuss the details of the project. Defendant again assured plaintiff that while its standard manufacturing procedures differed somewhat from FDC specifications, the variations were minor and would not preclude final State approval. In particular, defendant's agent made it clear that his company recognized the importance of meeting the State's stringent fire retardancy requirements and agreed that the wardrobes would fully comply with this specification. Both sides agreed, however, that an attempt would be made to obtain FDC approval of defendant's proposed use of vinyl "T" molding in place of the specified polyester edging, and that plaintiff would obtain the mirrors for the wardrobes from an alternative source. Based on these understandings, the parties arrived at an agreed price of $97,250.

 On December 14, 1977, plaintiff sent defendant a letter memorializing its understanding of this meeting and subsequent phone calls, which stated:

 
Subject to the approval of the Architect, it is our intent to award the manufacture of all wardrobes for the referenced project to your firm. All work to be in accordance with contract plans and specifications, specifically Section 10900 entitled Wardrobe Units. There are 444 units included. The total lump sum contract price will be Ninety-Seven Thousand Two Hundred Fifty Dollars and 00/100 ($97,250.00).

 "Section 10900" referred to the FDC's published wardrobe specifications. Defendant responded on December 28, 1977, with an acknowledgment stating:

 
In lieu of polyester edging specified for wardrobes, we propose to furnish vinyl "T" moulding, or self-edging in high pressure laminate.
 
Our proposal is based on furnishing all units as itemized and described in the quantities shown in our schedule, and fabricated in accordance with our enclosed specification.

 As these letters were exchanged, defendant prepared and submitted the first of several shop drawings to plaintiff for transmission to the architect. Plaintiff, however, noticed that the shop drawings failed to include various FDC-required items in addition to the polyester edging. Realizing that the FDC would never approve all the deviations as a matter of course, plaintiff never forwarded the shop drawings, and instead engaged in discussions with the architect concerning the acceptability of the modifications. These discussions met with uniformly negative results. Specifically, the architect disapproved the proposed use of vinyl "T" molding, the inclusion of low grade fire-retardant material, and the fixed panel design.

 During a meeting on February 15, 1978, to discuss the architect's objections, plaintiff agreed to provide the required polyester molding at its own expense, but insisted that defendant comply with the fire retardancy and removable panel requirements. Defendant, in turn, orally agreed to meet these demands if the contract price were increased, but stressed that it would implement its own plans for at least two of the three remaining discrepant details: the subframe ...


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