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ABELE TRACTOR & EQUIP. CO. v. VARITY CORP.

September 25, 1997

ABELE TRACTOR AND EQUIPMENT COMPANY, INC., Plaintiff,
v.
VARITY CORPORATION; MASSEY-FERGUSON, U.K., LTD.; MF INDUSTRIAL, LTD.; MASSEY-FERGUSON INDUSTRIAL MACHINERY, INC.; Defendants.



The opinion of the court was delivered by: HURD

 Presently before the Court is defendants' motion for summary judgment. Plaintiff submitted opposition, to which defendants replied. Oral argument was heard on May 8, 1997, in Utica, New York.

 I. FACTS

 On October 25, 1983, plaintiff Abele Tractor and Equipment Co., Inc. ("Abele Tractor") entered into a Distributor Agreement ("Agreement" or "contract") with defendant Massey-Ferguson (United Kingdom) Limited. The Agreement provided specific terms for Abele Tractor to sell, distribute, and service industrial machinery provided by defendants Massey-Ferguson, U.K., Ltd.; MF Industrial, Ltd.; and Massey-Ferguson Industrial Machinery, Inc. (collectively "Massey-Ferguson" *fn1" ). The type of industrial machinery purchased by Abele Tractor under the Agreement which is at issue in this lawsuit is the Tractor Backhoe Loader ("TBL"). The front of the TBL, the loader, is used in excavating large volumes of earth. The backhoe, at the other end of the machine, moves smaller amounts of earth and is designed to excavate below the surface grade. The backhoe is used in areas where precise control is required, such as near building foundations and around buried utilities. The backhoe consists of a bucket at the end of a boom, which functions by hydraulic pressure.

 Possibly as early as 1985, Abele Tractor received customer complaints regarding the functions of the backhoe. These complaints were forwarded to Massey-Ferguson. These complaints, primarily related to control of the bucket, were determined to be a result of difficulties with the hydraulic system and, more specifically, a hydraulic control valve. Abele Tractor attempted to remedy the problems by making adjustments to the hydraulic system, but apparently was convinced that installation of a new type of control valve was necessary to completely and permanently remedy the problems. Abele Tractor was in near-constant contact with Massey-Ferguson during the period when the TBLs exhibited these problems, approximately 1985 through mid-1988. At one point, Abele Tractor worked directly with a control valve supplier, Husco International, in attempting to find or develop a new control valve for the TBLs. When Massey-Ferguson obtained prototype valves from Husco, one was given to Abele Tractor for field testing in a TBL. Eventually, Husco control valves replaced the old, defective valves. Massey-Ferguson provided new Husco valves to distributors, including Abele Tractor, for warranty installations in TBLs which had been sold with defective parts.

 Beginning in approximately mid-1988, all new TBLs shipped to distributors by Massey-Ferguson contained the new Husco control valve. However, some delay in shipment was necessitated by Massey-Ferguson replacing the valve in new TBLs which had been manufactured prior to availability of the new Husco valve. Abele Tractor requested that its orders not be delayed, preferring to install the new valve upon arrival. Massey-Ferguson therefore shipped several new TBLs to Abele Tractor prior to installing the new valves, instead just providing the new valve with the TBL for installation by Abele Tractor.

 Abele Tractor, in its complaint, seeks rescission of the Agreement due to alleged breach and inability by Massey-Ferguson to perform its obligation to supply non-defective TBLs. As a consequence of rescission, Abele Tractor would be permitted to collect numerous items of damages which would be precluded under the contract clause limiting recovery for defective parts to repair or replacement. Additionally, Abele Tractor seeks quantum meruit recovery for its efforts in adapting and field testing the new Husco hydraulic control valve, which is not provided for in the Agreement. Thus, the contract must be rescinded in order for Abele Tractor to recover any of the damages sought.

 The defendants move for summary judgment based upon a statute of limitations bar. Defendants further argue that rescission is not warranted and that quantum meruit recovery is barred by the contract and by Abele Tractor's voluntary rendering of services.

 II. DISCUSSION

 A. Rescission

 The asserted basis for rescission is that the quality of the product was so defective, and Massey-Ferguson's attempts to remedy the problems were so deficient, as to constitute an inability to perform its obligation under the warranty provisions of the contract to repair or replace the defective parts. Abele Tractor does not in any way allege that Massey-Ferguson perpetrated a fraud regarding the defective TBLs or that Massey-Ferguson fraudulently induced Abele Tractor to enter into the Agreement.

 The Agreement between Abele Tractor and Massey-Ferguson is valid on its face. Under the Agreement Abele Tractor, as the Distributor, has waived any right to remedies provided pursuant to any law, which would increase the amount of compensation to which Abele Tractor is entitled beyond that provided for in the Agreement. The Agreement provides:

 
The Distributor hereby waives all rights which it may have under any law which is effective within the Territory or elsewhere and which provides for the payment to the Distributor of any commission or compensation or remuneration to which the Distributor is not expressly entitled under any provision of this Agreement.

 ( Potter Aff. Ex. I at 9 P 18.3.) Since the Agreement expressly limits recovery for defective parts to repair or replacement and excludes consequential and commercial losses of any type, *fn2" rescission of the contract would permit recovery above that for which the contract provides. Thus, Abele Tractor contractually waived the right to the remedy of rescission under New York law. Absent fraud, this contractual provision prevents rescission of the Agreement. See Keywell Corp. v. Weinstein, 33 F.3d 159, 165 (2d Cir. 1994); In re Hale Desk Co., 97 F.2d 372, 373 (2d Cir. 1938); Teleflex Inc. v. Collins & Aikman Prod. Co., 961 F. Supp. 368, 371-73 (D. Conn. 1996)(following New York law); Schine v. Schine, 254 F. Supp. 986, 988 (S.D.N.Y.)(waiver of fraud claim contrary to New York public policy but waiver of other causes of action permitted), appeal dismissed, 367 F.2d 685 (2d Cir. 1966); see also McCready v. Lindenborn, 172 N.Y. 400, 409, 65 N.E. 208 (1902)(measure of ...


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