Bmc Industries, Inc. v. Barth Industries, Inc.

160 F.3d 1322 (1998)

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Nature of the Case

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Facts

P manufactures ophthalmic lenses that are used in the production of eyeglasses. P decided to become the first company to automate portions of its lens manufacturing process. P commissioned D to complete a preliminary design and feasibility study. Based on this study, P and D entered into a contract where D would 'design, fabricate, debug/test and supervise field installation and startup of equipment to automate the operations of mold assembly declipping, clip transport, mold assembly clipping, and mold filling. The contract listed a price of $515,200 and provided for delivery of four automated production lines by June 1987. The Contract also stated that time was of the essence. In November 1986, the delivery date was extended by one month. In February 1987, D terminated its design subcontractor, and hired another engineering company, Belcan, in its place. Belcan redesigned the automation equipment and the parties executed a second written amendment, which extended the delivery date to 'October 1987.'D continued to experience technical problems and design difficulties that caused repeated delays. The parties did not extend the delivery date, but P and D each demonstrated a willingness to continue performance under the Contract. There were many technical difficulties that developed. D estimated that it could not deliver the equipment until April 1988. During the spring of 1988, although they protested D's failures P encouraged D to continue working on the project. By August 1988, P was losing total confidence in D. P and D met. P considered terminating the Contract and suing for breach. Instead, it continued to lead D to believe that it was determined to finish the project. The delays and setbacks continued while P encouraged D to carry on. Near the end of May 1989, D notified P that it had finally completed the mold assembly filling machine and that it would deliver the equipment. P refused delivery of the mold assembly filler and instead filed suit. P seeks damages for D's breach in the sum of $6.4 million. D asserted P's conduct after the October 1987 delivery date had passed amounted to a waiver of the delivery date under Article 2 of the Uniform Commercial Code. ('UCC'). D argued, P executives urged D to keep working, P engineers continued to assist D in overcoming technical problems, and P executives agreed to increase the purchase price. D claimed, P waived its entitlement to delivery of the machines in October 1987. D counterclaimed against P for breach of contract. The case proceeded to trial on the breach of contract, fraudulent misrepresentation, and promissory estoppel issues. At the close of evidence, the district court concluded that there was insufficient evidence of fraudulent misrepresentation and therefore dismissed each side's fraud claims. P got the verdicts. On appeal, D contends that the district court erred when it concluded that the UCC did not apply to the Contract, and thus did not govern the waiver issue. D argues that P's rejection of the machines constitutes a breach because P failed to provide reasonable notice of termination as required by the UCC.