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Neptune Research & Development Inc. v. Teknics Industrial Systems Inc.

Decided: August 24, 1989.

NEPTUNE RESEARCH & DEVELOPMENT, INC., A NEW JERSEY CORPORATION, PLAINTIFF-RESPONDENT,
v.
TEKNICS INDUSTRIAL SYSTEMS, INC., AND TEKNICS SALES CORPORATION, BOTH NEW JERSEY CORPORATIONS, DEFENDANTS-APPELLANTS



On appeal from the Superior Court of New Jersey, Law Division, Morris County.

King, Brody and Ashbey. The opinion of the court was delivered by King, P.J.A.D.

King

This is a commercial dispute arising from the sale of a specialized manufacturing machine. This case turns on the issues of the seller's anticipatory breach and its later attempted retraction of that repudiation. We conclude that the buyer had the absolute right to cancel in view of the seller's repudiation. We affirm.

The buyer sued in the Law Division, demanding return of its $3,000 deposit plus interest and costs, alleging proper cancellation

because the seller failed to make timely delivery. The seller answered and counterclaimed seeking the balance of a 15% contractually-established cancellation price. After a bench trial, Judge Russell found for the buyer and dismissed the counterclaim.

These are the facts. The evidence in this case consisted principally of the written contract and the testimony of Akos Sule, buyer's founder, president and majority shareholder, of Paul Ng, buyer's general manager and Sule's second-in-command, and of Dave Robertson, one of seller's owners. The facts were not in substantial dispute, although there was one minor difference of opinion.

Buyer manufactured solar-operated values used in scientific instruments. The machine involved is a Model RC-520 triple access Precision Vertical Machining Center which is used to drill holes in components with the very high degree of accuracy required by buyer. Sule saw the machine advertised in a trade journal and, believing that it was ideal for buyer's needs, contacted seller in late March or early April 1986. Following negotiations with seller's president, Ed Shepler, and an inspection of seller's facility, Sule placed an order on April 22, 1986.

The purchase price was approximately $55,000. The parties agreed to a mid-June 1986 delivery date, Shepler believing at the time that the machine was then in transit from Japan. Although the writing specified a mid-June delivery date; there was no clause stating that time was of the essence of the contract. Each page of the contract had printed language stating: "Cancellation charge 15 percent of total purchase price." Sule was aware of this provision. Printed "boiler plate" language in the standard terms and conditions of the sale dealt with delivery terms. Among other things, paragraph 5 of the standard terms and conditions stated that shipping dates were approximate, and that the seller would not be liable for delays which were caused by circumstances beyond the seller's control, such as fire, flood, strikes, or acts of God.

In early June, Sule instructed Ng to call seller about the delivery date. Ng testified that from June onwards he made a number of telephone calls and got noncommittal or evasive responses. Robertson testified that after the sale was negotiated seller discovered a design deficiency in the machine and redesigned it in order to make a better product. However, there was no evidence that Robertson informed Sule or Ng of the alleged reasons for the delay.

By late August, buyer was in desperate need of the machine, although it is not clear whether this was communicated to seller. On August 29, Sule went to seller's place of business to examine the product, which was then in the process of being assembled. The machine was essentially the same as that ordered by Sule, except that it no longer had a linear ballbearing raise which Sule had thought was an attractive aspect.

Nonetheless, Sule agreed to take it. He, Shepler and Robertson agreed that seller would have the machine ready on September 5. Robertson promised to call Sule on September 3 so that Sule could have two days to arrange for his truckers to pick up the product.

Robertson did not call Sule on September 3. The next day, September 4, Sule told Ng to find out what was happening. Ng testified that he had three conversations with Robertson. According to Ng, during the first conversation Robertson told him that under "no circumstances" would seller be able to get the machine ready for pickup on September 5. Rather, the machine could be picked up at the earliest on September 9 or September 10. Ng reported this information to Sule, who then decided to cancel because he was "fed up" with the course of dealing and no longer had faith in seller. At Sule's direction, Ng telephoned seller and informed Robertson and the office manager, Lorraine Mercier, that buyer was cancelling the order and that the contract was void because of the extraordinary delay in delivery and seller's failure to be truthful with buyer. Ng also asked for the return of the deposit. The third phone call took

place about an hour later, when Robertson stated that the machine could be ready by the next day. Ng responded, "Thank you, but no thanks."

Robertson testified that only two conversations occurred on September 4. During the first, Robertson advised Ng that the machine would not be ready the next day, but might be available about five days later. Ng responded that he would relate that information to Sule. Within an hour Ng called back and the following conversation took place:

The second conversation, they had called me -- Mr. Ng had contacted me back and had -- we started discussing that he wanted an earlier delivery and at that point, we had discussed that for a Friday delivery and of the Friday delivery there, he says, well, I'll have to check with Mr. Sule because Mr. Sule at this point would like to cancel the machine.

So he had set the phone down and I assume he set it down, I could hear in the background Mr. Sule saying, no, I do not want the machine and then Mr. Ng had come back to the phone and had said that, no, Mr. Sule has decided he does not want the machine even if it is available for tomorrow and at that point, I'd indicated that may be a cancellation charge.

By letter dated September 4, 1986, addressed to seller's office manager, Sule confirmed that buyer no longer wanted the machine and expected the return of its $3,000 deposit. Robertson claimed that the machine was in fact ready to be picked up on September 5. The parties thereafter attempted to resurrect the transaction, but the terms proposed by buyer and its attorney were not acceptable to seller. Buyer then filed this law suit a few weeks later.

At trial, seller argued that, assuming Robertson's statements on September 4 amounted to an anticipatory breach, the breach was not material, and thus buyer could not cancel because the machine was, in fact, ready for delivery on the date promised, September 5. Buyer, on the other hand, contended that the agreed upon September 5 delivery date had to be viewed in the context of the original delivery date of mid-June. Buyer's counsel also theorized that the machine that was ...


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