Opinion
No. C97-0222.
February 2, 1999.
ORDER
This matter comes before the court pursuant to the defendant's November 24, 1998, motion for summary judgment. Briefing was complete on this motion on January 19, 1999. Oral argument was held January 22, 1999. The parties have consented to the exercise of jurisdiction by a United States Magistrate Judge pursuant to 28 U.S.C. § 636(c). The defendant's motion for summary judgment is denied.
Plaintiff, Midwest Metal Products, Co. (Midwest), purchased a laser metal cutting machine with a resonator from the defendant, MC Machinery Systems, Inc. (MC), in March of 1996. It was delivered to plaintiff's Cedar Rapids, Iowa, site in May 1996. The machine was to be installed and installed and assembled on May 3, 1996. As it was lifted with a forklift, the machine tipped, fell, and was damaged beyond repair. This case is a dispute over responsibility for the damage. Plaintiff claims that defendant breached an agreement to supervise the installation of the machine and was negligent in the performance of its duty of supervision. The defendant contends that it did not agree to supervise the installation and that a negligence theory is unavailable where plaintiff seeks only economic damages.
Prior to executing the formal sales agreement, Midwest received a quotation from MC which provided information on the terms of the quotation. Under the hearing of "ADDITIONAL ITEMS INCLUDED AT NO CHARGE," the document reads as follows:
Upon the arrival of the laser system at your facility, we will dispatch an engineer to supervise the unloading, uncrating, and placement of the machine. Any cranes, forklifts, riggers, or other equipment used in the unloading process must be provided by Customer. The engineer will install and connect the laser.
(Exhibit B, filed December 30, 1998).
The contract contains the following clauses:
6. INSTALLATION.
Unless otherwise stated herein, Purchaser, at its sole cost and expense, shall furnish such materials, labor and equipment as may be necessary for the prompt erection, assembly and installation of the Equipment. In this regard, Purchaser shall (a) provide all transportation and necessary rigging services, (b) uncrate the Equipment and deliver it to the floor of the plant, (c) provide all utilities required for assembly to the Equipment, and (d) provide such other services as may be required to allow Seller to place electric leads into the Equipment. Seller shall assemble attachments to the Equipment, test the Equipment and provide Purchaser with Seller's customary training of Purchaser's personnel.
. . .
* MISCELLANEOUS PROVISIONS
* This ACKNOWLEDGMENT-SALES CONTRACT constitutes the entire agreement between Seller and Purchaser as it relates to this transaction and the respective liabilities of Purchaser, Seller and the Manufacturing and Selling Companies, and supersedes any and all prior agreements, correspondence, quotations or understandings heretofore in force between the parties. There are no agreements between
* Seller and Purchaser with respect to the Equipment herein except those specifically set forth and made part of this ACKNOWLEDGMENT-SALES CONTRACT. Acceptance of this ACKNOWLEDGMENT-SALES CONTRACT is limited to the terms, conditions, specifications, and prices set forth herein. Any additional terms, conditions and/or prices are rejected by Seller unless expressly agreed to in writing by Seller.
. . .
* All rights available to Purchaser and Seller under the Uniform Commercial Code except as specifically limited or excluded herein (even though not specifically enumerated herein), are expressly reserved to Purchaser and Seller as remedies available in the event of default of the other party. The Manufacturing and Selling Companies shall be extended the benefits and protection of this Sales Contract.
. . .
* This ACKNOWLEDGMENT-SALES CONTRACT shall be construed in accordance with the laws of the state of Illinois.
Paragraph 15(a) states that the sales contract is the entire agreement between the parties. It further states that there are no agreements with respect to the equipment except those specifically set forth and made part of the contract. Finally, it states that it supersedes earlier quotations. Pursuant to the contract, the defendant argues that its only obligation regarding installation was to place electric leads to the equipment, assemble attachments to the equipment, test the equipment, and provide plaintiff with defendant's customary training of plaintiff's personnel. The defendant does not deny that it had earlier agreed to dispatch an engineer to supervise the unloading, uncrating, and placement of the machine. Further, there is no dispute that the defendant dispatched an engineer to plaintiff's facility on May 3, 1996. It simply argues that because of the integration clause in the contract and the fact that the promise in the sales quotation was not repeated in the contract, it was not obligated to perform the promise in the sales quotation.
Thus, the defendant here makes a technical argument. Technically, the contract only requires plaintiff to provide resources (materials, labor, and equipment) to erect, assemble, and install the equipment. The contract is silent and therefore ambiguous as to who should provide the "know-how" to get the machine from the box to an operating condition. The defendant agreed in the contract to place electrical leads, assemble attachments, test it, and provide plaintiff with the defendant's "customary training." Both parties had responsibility for the assembly and installation of the machine.
Because the term "customary training" is not defined in the contract, it is appropriate to consider parol evidence pursuant to the Uniform Commercial Code § 2-202. Under both Illinois and Iowa law, this section states the following:
Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented
a. by course of dealing or usage of trade of by course of performance; and
b. by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.
The official commentary to § 2-202 provides as follows:
Paragraph (a) makes admissible evidence of course of dealing, usage of trade and course of performance to explain or supplement the terms of any writing stating the agreement of the parties in order that the true understanding of the parties as to the agreement may be reached. Such writings are to be read on the assumption that the course of prior dealings between the parties and the usages of trade were taken for granted when the document was phrased. Unless carefully negated they have become an element of the meaning of the words used. similarly, the course of actual performance by the parties is considered the best indication of what they intended the writing to mean.
Thus, the official commentary shows that it is appropriate to look to the parties' course of dealing. When that is done, the plaintiff makes a compelling showing that the engineer sent to plaintiff's facility by the defendant was sent for the exact purpose set forth in the sales quotation; to supervise the unloading, uncrating, and placement of the machine. The use of this course of dealing does not lead to any inconsistency with any written provision of the contract itself. The motion for summary judgment is denied.
Economic Loss Doctrine
The defendant appears to concede that a factual dispute is created as to whether the defendant's engineer was at plaintiff's premises to supervise the installation and assembly of the machine. Similarly, the defendant appears to recognize that even if this service was provided gratuitously, tort law imposes an obligation to carry out such supervision in a reasonably prudent manner. The defendant argues, however, that a tort theory such as plaintiff's negligence theory is inappropriate here due to the economic loss doctrine. This doctrine was originally recognized in Iowa in Nebraska Innkeepers, Inc. v. Pittsburgh-Des Moines Corp., 345 N.W.2d 124 (Iowa 1984), and most recently discussed in American Fire Cas. Co. v. Ford Motor Co., 1999 WL 22745, ___ N.W.2d ___ (Iowa Jan. 21, 1999). The general doctrine prohibits tort recovery for purely economic losses, consigning such claims to contract law. American Fire Cas. supra. The parameters of the doctrine are not as simple as the general rule set forth above.
The Supreme Court emphasized in American Fire Cas. supra, that the line to be drawn is one between tort and contract rather than between physical harm and economic loss. Factors to be considered are the nature of the defect, the type of risk, and the manner in which the injury arose. In Nelson v. Todd's Ltd., 426 N.W.2d 120 (Iowa 1988), the economic loss doctrine was applied to preclude tort theories where plaintiff was suing over the failure of a meat curing product to work as intended. The product did no physical damage; it simply did not work as intended. The court found that this disappointment with the performance of a product is the hallmark of contract law, not tort theory.
In Tomka v. Hoechst Celanese Corp., 528 N.W.2d 103 (Iowa 1995), the Court explained the theory by referring to an analogy to a fire alarm. If a fire alarm fails to work and a building burns down, the Supreme Court explained that it results in only economic loss for which contract theories alone provide relief. However, if the fire were caused by a short circuit in the fire alarm itself, a tort theory of recovery would still be available.
In other words, contract law protects a purchaser's expectation interest that the product received will be fit for its intended use. . . . The essence of a products liability law is that the plaintiff has been exposed, through a dangerous product, to a risk of injury to his person or property. Tomka supra, at 107.
As the Court of Appeals of Iowa stated:
Losses in product liability cases are generally limited to physical harm to the plaintiff or physical harm to property of the plaintiff other than the product itself . . . economic losses to the product itself are excluded. . . . Notwithstanding, we ultimately look to the policies behind tort law and contract law to determine whether a loss is compensable in tort or in contract. If the damage was a foreseeable result from the failure of a product to work properly, the remedy lies in contract, since the loss relates to a consumer's disappointed expectations due to deterioration, internal breakdown or non accidental cause. . . . On the other hand, when the harm is a sudden or dangerous occurrence resulting from a general hazard in the nature of the product defect, tort remedies are generally appropriate because the harm could not have been reasonably anticipated by the parties.Richards v. Midland Brick Sales Co., 551 N.W.2d 649, 651 (Iowa 1996).
Finally, in American Fire Cas. supra, the product at issue was a 1991 pick-up truck that suddenly caught fire due to an alleged defect in the product. The injury was not a foreseeable result from a failure of a product to work properly and was not caused by a consumer's disappointed expectation in the product or a failure to get the benefit of the bargain. Because the fire at issue was appropriately characterized as a sudden and highly dangerous occurrence, the plaintiff was not precluded from its tort remedies.
In the matter now before the court, the plaintiff sues because it believes that the defendant's negligence is the proximate cause of a sudden accident. There is, of course, no claim that the product failed to meet plaintiff's expectations or did not work as intended. The plaintiff claims that the product was defective in that it was top-heavy and that the defendant's supervisor knew or should have known of that characteristic and should have warned the plaintiff against the use of a forklift to lift the top-heavy object. Under the cases cited above, plaintiff's negligence theory is viable.
Upon the foregoing,
IT IS ORDERED
That the defendant's motion for summary judgment is denied.