the parol evidence rule does not exclude supplementing the
writing with consistent additional oral terms. Ill.Rev.Stat.
ch. 26, § 2-202. Notwithstanding the language therein excluding
all oral agreements, the evidence does not support Custom's
contention that the parties intended the September purchase
order to be the exclusive statement of the agreement.
7. The fourth alleged breach of express warranty is Penda's
claim that Custom expressly warranted that CAM No. 1 would
have twin-sheet capability. The parties do not disagree that
the machine was so warranted and the Court has found that the
machine is incapable of twin-sheet forming. Thus, Custom has
also breached this warranty.
8. Finally, Penda makes a general claim that CAM No. 1 did
not conform with the machine specified in the contract,
arguing that the machines are "virtually worthless." This
argument is more appropriately made under the rubric of breach
of implied warranty of merchantability. As Penda repeats this
argument under that rubric, the Court finds no need to deal
with it as an express warranty question.
9. An implied warranty of merchantability accompanies all
goods sold by a merchant of goods of that kind unless
expressly excluded or limited. Ill.Rev.Stat. ch. 26, § 2-314.
To be merchantable, goods must be, inter alia, fit for the
ordinary purposes for which such goods are used and passable
without objection in the trade under the contract description.
CAM No. 1 failed to meet these basic standards of
merchantability. The Court, therefore, concludes that Custom
breached its implied warranty of merchantability.
10. There are three prerequisites to the creation of an
implied warranty of fitness for a particular purpose: (1) the
seller must have reason to know of the particular purpose for
which the buyer requires the goods, (2) the buyer must rely on
the seller to select suitable goods, and (3) the seller must
have reason to know of the buyer's reliance. Ill.Rev.Stat. ch.
26, § 2-313. All three prerequisites are satisfied in this
case. The record shows that Custom knew of Penda's need for a
machine that would operate at 120 cycles per hour with the
Envirodisc mold; that Penda relied on Custom's skill in the
manufacture of thermoforming machines to provide such a
machine; and that Custom had reason to know of Penda's
reliance. Custom's argument that Penda produced the technical
specifications for the machine and thus did not rely on Custom
is not supported by the evidence. Penda's additional
specifications are merely a list of Penda's operational needs,
which do not constitute the type of technical specifications
that preclude implied warranties of fitness for a particular
purpose. See, Aluminum Co. of America v. Electric Flo Corp.,
451 F.2d 1115, 1119 (10th Cir. 1971). The evidence shows that
the implied warranty was breached by Custom.
11. Custom contends that, despite any breaches, Penda's
remedies are contractually limited to repair and replacement
of parts. There is no dispute that the contract contains a
clause which provides that remedies are so limited and that
Ill.Rev.Stat. ch. 26, § 2-719 allows parties to limit remedies.
Nevertheless, the section also provides that "[w]here
circumstances cause an exclusive or limited remedy to fail of
its essential purpose, remedy may be had as provided in this
Act." Section 2-719(2). A limited remedy of repair and
replacement fails of its essential purpose when it is
inadequate to provide the buyer with goods which conform to the
contract within a reasonable time. AES Technology Systems, Inc.
v. Coherent Radiation, 583 F.2d 933, 939 (7th Cir. 1978); Adams
v. J.I. Case Co., 125 Ill. App.2d 388, 261 N.E.2d 1 (1970);
Murray v. Holiday Rambler, Inc., 83 Wis.2d 406, 265 N.W.2d 513
(1978). It is irrelevant to this standard whether the seller's
failure to correct the defect is willful or not. Murray, 265
N.W.2d at 521. In the instant case, the record clearly
evidences that Custom did not correct the defects in CAM No. 1
within a reasonable time. Therefore, the limitation of remedy
clause fails of its essential purpose and full UCC remedies are
available to Penda.
12. In order to avail himself of remedies under the UCC, a
buyer who has accepted goods must notify the seller of any
breaches within a reasonable time after he discovers or should
have discovered such breach. Ill. Rev.Stat., ch. 26, § 2-607.
There is no question but that Penda informed Custom on numerous
occasions of the malfunctioning of CAM No. 1 shortly after
delivery thereof. Indeed, written notification of the problems
with CAM No. 1 was sent to Custom on November 20, 1978. The UCC
does not require any particular type of notification in any
particular words. Murray v. Kleen Leen, Inc., 41 Ill. App.3d 436,
442, 354 N.E.2d 415 (1976). Official Comment 5 states that
"[t]he content of the notification need merely be sufficient to
let the seller know that the transaction is still troublesome
and must be watched." See also AES Technology Systems, 583 F.2d
at 936. Of the troublesome nature of CAM No. 1, Custom was well
13. Ill.Rev.Stat. ch. 26, § 2-714 establishes the basic
remedy for a buyer's damages in regard to accepted goods. Under
this provision, the buyer is entitled to recover his losses
resulting in the ordinary course of events from the seller's
breach. Subsection (2) of Section 2-714 sets out the formula
commonly used to quantify this loss: the difference at the time
and place of acceptance between the value of the goods as
accepted and the value of the goods if they had been as
warranted. This difference in value can be computed by
reference to the cost of repairing the goods so that they meet
the warranty standards; i.e., the difference in value between
the goods as accepted and as warranted equals the cost of
repairs.*fn8 White and Summers, Handbook of the Law Under the
Uniform Commercial Code, 317 (2d ed. 1980).
14. Penda's cost of repairing CAM No. 1 to operate as
warranted is comprised of the following elements:
(a) maintenance employee time — $9,522 (529
downtime hours x $18/hour);*fn9
(b) assistance and parts from outside contractors
(c) parts from Penda's inventory — $500;
(d) addition of twin-sheet capability —
Thus, Penda is entitled to recover from Custom the amount of
$127,588*fn11 as damages under Section 2-714 for its breach
of the implied warranty of merchantability.
15. Ill.Rev.Stat. ch. 26, § 2-715 allows for the recovery of
incidental and consequential damages from the
breaching seller. Custom's argument that the limitation of
remedies clause precludes all consequential damages as it
shows that Custom had not agreed to them is without merit. As
the court held in Adams — where a limitation of remedy to
repair and replacement clause was also found to have failed of
its essential purpose — a buyer need not show "a prior
understanding or agreement that the seller be bound for
consequentials damages in the event of breach" in order to
recover consequentials. 125 Ill. App.2d at 406, 261 N.E.2d 1;
KKO, Inc. v. Honeywell, 517 F. Supp. 892, 898 (N.D.Ill. 1981).
Consequential damages include losses resulting from the buyer's
general or particular requirements of which the seller had
reason to know at the time of contracting. Section 2-715(2)(a).
Penda claims the following as consequential damages:*fn12
(a) lost productive capacity during machine's
downtime — 582 hours (downtime hours) x $68
($45 overhead plus $23 profit) per hour =
(b) maintenance employee time — 582 hours x
$18 per hour = $10,476;
(c) lost productive time of operators during
machine's downtime — 582 hours x $20 per hour
(d) assistance and parts from outside contractors
(e) lost productive capacity due to machine's
inability to operate at 120 cycles per hour
— 1,534 hours (hours lost) x $68 per hour ($43
overhead plus $23 profit) = $104,312;
(f) lost management time due to defects in CAM
No. 1 — $8,500
(g) lost profits on lost contracts —
(h) parts from Penda's inventory — $500.