The opinion of the court was delivered by: MACMAHON
MacHAHON, District Judge.
This is an action by a seller, Wullschleger & Co., Inc., against a buyer, Jenny Fashions, Inc. (Jenny), for nonpayment of $28,965.64, plus interest, for fabric sold and partially delivered to Jenny. Claiming a latent defect in the fabric, Jenny counterclaims for lost profits in the amount of $67,361.94, plus interest, alleging breach of both an express and an implied warranty of merchantability.
A bench trial was held on April 15 and 16, 1985. After carefully considering the exhibits, hearing and observing the witnesses, and weighing all the evidence and the arguments of counsel, we find the following facts:
Plaintiff, a North Carolina corporation with its principal place of business in that state, converts unfinished cloth to a finished state which it sells to garment manufacturers. Jenny, a New York corporation with its principal place of business in New York City, sells women's dresses made for it by contract sewing manufacturers. We have diversity jurisdiction.
In September 1983, David Pearl (Pearl), Jenny's piece goods buyer, ordered a sample of six yards of lightweight polyester/rayon woven fabric, style 6697, from plaintiff. Aaron Talbert (Talbert), plaintiff's salesman, expressly represented that the fabric was "first quality" under industry standards. Talbert knew that Jenny intended to use the fabric to manufacture women's dresses but did not know the particular pattern or style Jenny intended to make.
Jenny, through its contractors, made the sample yardage into dresses having "circle" skirts, which are shaped by cutting the fabric in a semi-circular pattern and sewing the edges together in one seam. There was no apparent problem with the skirts, so Jenny decided to buy a large quantity of the fabric and make four styles of such dresses which it offered for sale to its customers.
Jenny's customers placed orders for the dresses, and to fill them Jenny bought 37,500 yards of the fabric from plaintiff during the period from October 13, 1983 to January 4, 1984. However, only 23,577 yards were delivered, at a price of $27,107.81, for which Jenny paid $11,402.94, leaving an unpaiddges together in one seam. There was no apparent problem with the skirts, so Jenny decided to buy a large quantity of the fabric and make four styles of such dresses which it offered for sale to its customers.
Jenny's customers placed orders for the dresses, and to fill them Jenny bought 37,500 yards of the fabric from plaintiff during the period from October 13, 1983 to January 4, 1984. However, only 23,577 yards were delivered, at a price of $27,107.81, for which Jenny paid $11,402.94, leaving an unpaid balance of $14,704.87.
Jenny, upon receipt, visually inspected the fabric for quantity and quality by placing samples on a measuregraph, an illuminated examining machine, and again no visible physical defects appeared. the invoices delivered with the fabric disclaimed: "No claims allowed after 10 days," and "no allowance will be made after the goods have been cut."
Jenny began cutting the fabric in December 1983 and ultimately received 5,078 completed dresses from its sewing contractors. In mid-January 1984, however, Jenny discovered that the hems of the circle skirts were distorted in that the bottom hem elongated as much as six inches from its original position when the skirts were pressed on a Hoffman press, a flat bed press with automatic steam heat. Unable to ascertain the cause of the distortion and suspecting defective fabric, Jenny attempted to purchase substitute fabric from three different mills, but none of the available fabric was suitable. meanwhile, some of Jenny's customers, who were dissatisfied with the distortion, had cancelled their orders, and, for the same reason, Jenny cancelled the majority of its remaining orders after notifying plaintiff of the distortion problem and the resulting cancellations.
In April 1984, Jenny's textile expert, Gerald M. Varley (Varley), inspected the fabric and found that a large portion was "skewed," i.e., its warp (vertical) and filling (horizontal) yarns were not at right angles to each other. Plaintiff admits that some of the fabric was skewed and therefore not of "first quality." Nevertheless, it disclaims liability, asserting that the distortion was caused not by the skew, but by Jenny's misuse of the fabric.