Appeal from the United States District Court for the Western District of Wisconsin, No. 85 C 922 - John C. Shabaz, Judge.
Cummings, Wood and Manion, Circuit Judges.
This diversity action arises out of losses sustained by plaintiffs in 1982 when a component part of a large power transformer, manufactured and sold by defendant, failed and causes extensive damage to the transformer. The district court granted defendant's motion for summary judgment, 645 F. Supp. 1129 (W.D. Wis. 1986), and plaintiffs appeal. For the reasons set forth below, we affirm.
Plaintiffs Wisconsin Power & Light Co., Wisconsin Public Service Corp., and Madison Gas & Electric Co. are all Wisconsin corporations engaged in the business of generating and selling electricity to Wisconsin residents. The three companies operate the Columbia Generating Station, located in Columbia County, Wisconsin, as a joint venture. In 1973 Wisconsin Power & Light Co. ("Wisconsin Power") undertook on behalf of the joint venture to purchase a large electrical transformer for the Columbia Station.
By letter dated November 6, 1973, Wisconsin Power invited defendant to submit a proposal to furnish and deliver one main power transformer complete with accessories. Accompanying the letter was a document containing certain performance specifications, proposal forms and drawings, which had been prepared in part by Sargent & Lundy, Engineers, of Chicago. The warranty provisions of the bid solicitation provided in material part:
Contractor agrees, promptly and at his own expense, either to remedy any part of the WORK which during the first year of actual use in service proves defective or otherwise unsuitable for the aforesaid purposes, or to replace such part of the WORK by shipping to Purchaser a new part under the same terms as apply hereunder to the shipment of the original part. A similar warranty shall apply to any replacement parts.
(General Conditions for Equipment and Material Purchases, Form 207 WP&L, par. 5). Paragraph 4.4 of the Instructions to Bidders, included with the solicitation document, provided:
And contract or purchase order resulting from these Bid Documents will incorporate the terms and provisions of said documents. It will be assumed that Bidder agrees to the provisions of said documents, unless exceptions are specifically and clearly listed in his bid. All such exceptions must be listed together and specifically identified as Exceptions. Bidder's printed terms and conditions are not considered specific exceptions.
In response to the solicitation, defendant submitted a proposal on December 7, 1973. In its cover letter accompanying the proposal, defendant took exception, in accordance with paragraph 4.4 above, to the warranty provisions of the bid solicitation. The letter stated that defendant's price quotation was based on "the warranty as described in Selling Policy 48-600 dated June 14, 1973, including the provisions of the special warranty" and the "limitation of liability clause as contained in SP 48-600." The Standard Warranty provision of SP 48-600 provided in pertinent part:
Westinghouse warrants that all components of the transformer delivered by it will be of the kind and quality described in the order or contract and will be free of defects in workmanship and material. Should any failure to conform to this warranty appear within one year after date of shipment, Westinghouse shall upon prompt notification thereof and substantiation that the equipment has been stored, installed, operated and maintained in accordance with Westinghouse recommendations and standard industry practice, correct such non-conformities, at its option, either by repairing any defective part or parts or by supplying a repaired or replacement part or parts F.O.B. Westinghouse Repair Service plain or factory. However, if Westinghouse has installed the equipment or furnished field engineering services with respect to its installation, and provided such installation has not been delayed by the Purchaser, the warranty period shall terminate one year after the completion of installation, or 18 months after the date of shipment, whichever occurs earliest.
In addition, Westinghouse warrants for a period of ten years from the date of shipment that the core and coil assembly of the transformer will remain free of damage resulting solely from defects in such core and coil assembly. In the event that Westinghouse is promply notified within the warranty period of a failure to comply with this warranty, Westinghouse, at its option either will repair or replace the defective and damaged core and coil assembly or will supply a repaired or replacement core and coil assembly F.O.B. Westinghouse Repair Service plant or factory.
The foregoing warranty is exclusive and in lieu of all other warranties of quality whether written, oral, or implied (including any warranty of merchantability or fitness for purpose).
The remedies provided above shall be Purchaser's sole remedies for any failure of Westinghouse to comply with the warranty provisions, whether claims by the Purchaser are based ...