response to defendant's request for information by letter dated July 28, 1969. (Tr. June 14, 1973, pp. 202-203; Exhibit 36B; Tr. June 14, 1973, p. 207; Exhibit 39; Tr. June 15, 1973, p. 30).
73. The letter of Mr. Page dated August 11, 1969 (Exhibit 39) was written approximately ten (10) days after reworked Lot 2-71, now 2-71A, was accepted by the Government and four (4) days after Lot 2-72A was accepted by the Government which was after all of the rework had been completed. (See Exhibit 4.2 and Exhibit 4.3).
74. From the date of the failure on May 19 to the date of the Page letter of August 11, other than the Bond telephone conversation on May 22, the plaintiff did not advise the defendant of the nature of the alleged problem, the extent of the alleged problem, the results of any alleged testing, the contemplated rework procedures, the projected cost of the contemplated rework procedures, and it did not furnish the defendant with any samples of the suspect bearings or give the defendant any opportunity to examine the failed fuses or the bearings in said fuses. (Tr. June 14, 1973, p. 203).
75. In September, 1969, plaintiff returned 17,410 sleeve bearings from the shipment of May 1, 1969 in their original containers to defendant. (Exhibit 38, Tr. March 9, 1973, pp. 19-20; Tr. March 12, 1973, p. 24; Tr. June 7, 1973, pp. 181-184; Tr. June 15, 1973, p. 115).
76. After plaintiff returned the 17,410 sleeve bearings, defendant did not test the oil on said sleeve bearings although defendant had been notified that the oil on these sleeve bearings was the wrong oil. (Tr. June 7, 1973, pp. 181-185).
This action was brought by a buyer, General Instrument Corporation, F. W. Sickles Division, against a manufacturer and seller of sleeve bearings, Pennsylvania Pressed Metals, Inc., for breach of contract. The defendant's sleeve bearings were incorporated by plaintiff into bomb fuses manufactured by plaintiff for the United States Government. The case was tried without a jury.
Jurisdiction is founded upon 28 U.S.C. § 1332(a)(1).
Where, as here, a contract for sale of goods fails to designate as controlling the law of a particular jurisdiction, Pennsylvania law provides that the Pennsylvania Uniform Commercial Code shall apply to the transaction if there is "an appropriate relation to this state." 12A P.S. § 1-105. The defendant's plant is in Pennsylvania. The parties have briefed this case with reference to Pennsylvania law. The Court is convinced that the transaction in question bears a reasonable relation to Pennsylvania, and that Pennsylvania law is applicable.
1. Liability for Breach of Contract.
The defendant seller does not dispute that it expressly warranted that the sleeve bearings delivered to plaintiff on May 1, 1969 were manufactured in strict compliance with the applicable military specifications and, in particular, warranted that the bearings were impregnated with a light oil meeting military specification MIL-L-6085. The largest portion of the eleven-day trial was spent in seeking to determine whether the bearings were impregnated with, or had on their surface, non-conforming oil, and whether the failure of bomb fuse Lot 2-71 to pass the Government's Lot Acceptance Test was attributable to nonconforming oil in or on the bearings.
While stopping short of finding that the bearings in question were in fact impregnated with improper oil, the Court has determined that at least the oil found on the surface of the bearings and in the shipping bags was a dark, heavy oil which failed to meet specification MIL-L-6085, and that plaintiff received the bearings in this condition. Absent any explanation by defendant as to how the improper oil got on the bearings, the Court has determined that the oil problem originated in defendant's plant. Based on these findings, the Court concludes that defendant breached its express warranty to supply bearings meeting the applicable specifications and its implied warranties of merchantability and fitness for a particular purpose. 12A P.S. §§ 2-313 to 2-315. In regards to the implied warranty of fitness for a particular purpose, the Court has found that defendant knew of the particular purpose for which the bearings were required, and that plaintiff relied on defendant's skill in furnishing suitable bearings. 12A P.S. § 2-315.
The defective bearings were delivered to defendant on May 1, 1969. Having accepted the bearings in question, the plaintiff was bound by the provisions of 12A P.S. § 2-607(3)(a) which provides that
"the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy . . ."
On May 22, 1969, the plaintiff notified defendant that there were bomb fuse failures caused by contaminated oil on the sleeve bearings supplied by defendant. In form, this oral communication constituted sufficient notice under 12A P.S. § 2-607(3)(a), since the notice "need only be such as informs the seller that the transaction is claimed to involve a breach . . .." 12A P.S. §§ 2-607, Comment 4. There remains the question of whether the notice, given on the day the defect was in fact discovered, was timely. Defendant contends that the defect was obvious, that it should have been discovered upon receipt of the bearings on May 1, 1969, and that the three-week delay in the giving of notice of the breach rendered it untimely. In my view, the obviousness of the defect and the consequences of failing to discover it prior to incorporating the bearings in the bomb fuses are factors more appropriate in the determination as to whether plaintiff is entitled to incidental and consequential damages under 12A P.S. § 2-715. As discussed below, the Court has concluded that the improper oil should have been discovered before the bearings were put into the fuses. However, on the question of normal breach of warranty damages as provided by 12A P.S. § 2-714, the notice of breach given shortly after the defect should have been discovered was within a "reasonable time" as required by 12A P.S. § 2-607(3)(a).
The normal measure of damages for breach of warranty is the difference between the value of the goods accepted and the value they would have had if they had been as warranted. 12A P.S. § 2-714(2). The value of the 92,000 bearings received on May 1, 1969 was practically zero because of the non-conforming oil. The value of the bearings as warranted was less than $2,000.00. However, plaintiff makes no claim for this difference in value because it never paid defendant for the faulty bearings. Plaintiff's sole claim is for incidental and consequential damages.
The award of incidental and consequential damages for breach of contract is not automatic. 12A P.S. § 2-714(3) provides that "in a proper case any incidental and consequential damages under the next section may also be recovered." The next section, 12A P.S. § 2-715, provides in full:
"(1) Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.