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Case Brief of Delchi Carrier S.p.A. v. Rotorex Corp

0 September 10 2014, 10:36 in Case Brief Essays

Case Brief of Delchi Carrier S.p.A. v. Rotorex Corp.

71 F.3d 1024 (2ndCir. 1995)

Facts: The case is an appeal from a judgment rendered by the lower court awarding $1,785,772.44 in damages for lost profits and other consequential damages in favor of Delchi Carrier S.p.A.

The background of the case is as follows: In January 1988 Rotorex offered to sell 10,800 compressors to Delchi for use in its "Ariele” line of portable room air conditioners. It appeared that Delchi was scheduled to sell the air conditions in the spring and summer of 1988. Before the sale was consummated, Rotorex sent a sample compressor and a written performance specification in favor of Delchi. Based on the executed contract, the compressors were supposed to be delivered in three shipments before May 15, 1988.

The first shipment was sent by sea on March 26. The first batch of compressors arrived on April 20 and was paid using letters of credit. The second batch of compressors was sent on May 9. While the second batch of shipment was in transit, Delchi discovered that the first batch of compressors did not conform to the sample model and accompanying specifications Rotorex initially sent to them.

Subsequently, Rotorex sent its representative to the Delchi where it was informed that 93% of the compressors were rejected in quality control checks because they had lower cooling capacity and consumed more power than the sample model and specifications. Several attempts were made to cure the defects in the compressors but they were all unsuccessful. Delchi demanded that Rotorex should deliver new compressors in accordance with the original sample and specifications. When Rotorex refused, Delchi cancelled the contract.

Delchi then secured the needed supplies from Sanyo but it was not able to obtain the needed supplies in time for its sale. As a result, it suffered losses in its sales volume for the 1988 selling season. Delchi filed suit for breach of contract under the United Nations Convention on Contracts for the International Sale of Goods (CISG).

The trial court granted Delchi’s motion for partial summary judgment holding Rotorex liable for breach of contract. The trial court based its decision on Art 35 of the CISG which states that "the seller must deliver goods which are of the quantity, quality and description required by the contract” and that "the goods do not conform with the contract unless they possess the qualities of goods which the seller has held out to the buyer as a sample or model.”

Art 36 of the CISG further states that "the seller is liable in accordance with the contract and this Convention for any lack of conformity.” The contract to deliver the compressor between Rotorex and Delchi was based on the sample compressor sent by Rotorex to Delchi and upon written specification on cooling capacity and power consumption.

Issue: whether Rotorex should be held liable under the contract for breach of contract

Whether Delchi is entitled to damages for loss of profits

Ruling: a) Rotorex should be held liable for breach of contract

b) Delchi is entitled to recover loss of profits from Rotorex


A. Breach of Contract

The Court of Appeals affirmed the ruling in this case. It recognized the evidence presented by Delchi which includes: 1) the letter dated May 13, 1988 which states that the specification sheet was "in error” and that the compressors would actually generate lesser cooling power and consume more energy than the specification sent to Delchi; 2) the deposition signed by the engineering representative of Rotorex that at least some of the compressors did not conform to the specifications; 3) the May 17, 1988 letter signed by Rotorex President John McFee addressed to Delchi stating that the compressors supplied were less efficient than the sample and did not meet the specifications provided by Rotorex; 4) the Answers Rotorex filed in court admitting that "some of the compressors… did not conform to the nominal performance information.

Art 25 of the CISG states the condition before a buyer may avail of the remedies under the CISG. It states that "A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result.”

Art 46 of the CISG also states the various remedies available to the buyer should there be a fundamental breach of contract. It states that "The buyer may require performance by the seller of his obligations unless the buyer has resorted to a remedy which is inconsistent with this requirement. (2) If the goods do not conform to the contract, the buyer may require delivery of substitute goods only if the lack of conformity constitutes a fundamental breach of contract and a request for substitute goods is made either in conjunction with notice given under article 39 or within a reasonable time thereafter. (3) If the goods do not conform to the contract, the buyer may require the seller to remedy the lack of conformity by repair, unless this is unreasonable having regard to all the circumstances. A request for repair must be made either in conjunction with notice given under article 39 or within a reasonable time thereafter.”

In addition, the injured party may also ask that the contract be declared void under Art 49 of the CISG. It states that "(1) the buyer may declare the contract avoided:(a)if the failure by the seller to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract”

Based on the evidence presented by Delchi and the admissions of the representatives of the Rotorex, it was clear that Rotorex did not substantially deliver and Delchi did not substantially receive that which it contracted to deliver and receive, respectively. The goods Rotorex delivered did not conform to the sample model and the specifications to Delchi. The breach is fundamental since the cooling power and energy consumption are important specifications which are taken into account in the purchase of air conditioners. The failure on the part of Rotorex to conform to the specifications in cooling power and the energy consumption has an impact on the value of the goods delivered.

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