Contracts Keyed to Knapp
Paul Gottlied & Co., Inc v. Alps South Corp
Alps South Corp. (Alps) (D), a medical manufacturer of product liners used by amputees to attach prosthetic devices, began the test of different high-tech fabrics to enhance the durability and stability of its liners, of which Paul Gottlieb & Co., Inc. (Gottlieb) (P) who was into the production of specialty fabrics supplied Alps (D) with fabrics (D). Alps (D) finally settled for Gottlieb’s (P) “Coolmax” fabrics because it was highly patronized by its customers. But six months to this time, some fabric samples which Gottlieb submitted to Alps (D) was rejected on for the inconsistencies that was noticed in both the texture and the color. Alps (D) penned his dissatisfaction immediately to Gottlieb (P) stating that future commercial relationship mandated the provision of a more consistent product.But this letter did not convey the information that Alps (D) could incur a significant additional cost as a result of switching to the use of another fabric and the specialized used Alps (D) was putting the product into was not also disclosed to Gottlieb (P). Gottlieb concurred to rework the fabric before final delivery to Alps (D0 but did not notify Alps (D) when it exhausted and substituted the stock of the yarn it had used in making the Coolmax fabric. The issue that arose from the substituted yarn was that it was not as elastic and the previous one and the customers of Alps (D) started complaining about the usage of the liners. This prompted Alps (D) to recall and destroy the liners that were substituted with the new yarn and after this incidence; both parties found out that the substituted yarn was the cause of the complaints.This made Alps (D) to hold unto the money it was to pay Gottlieb (P) in which Gottlieb (P) brought suit for damages for the nonpayment while Alps (D) counterclaimed for damages which it alleged was suffered as a result of Gottlieb’s (P) breach of warranty. Pertaining to Alps (D) counterclaim, on the back of the goods was a limitation of liability contract that purported to limit consequential damages (the contract was one of the series of six that had similar clauses on the forms). The court in its wisdom however held that the clause significantly changed the contract so that the clause was excluded from the contract under the U.C.C. S 2-207 after it had considered the language of the clause to be affirmative. This made the court to award a consequential damage (up to the tune of $695,000) to Alps (D) and nonpayment damages (up to the tune of $29,000) to Gottlieb (P). The intermediate appellate court of the state however granted the review of this ruling.
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