North American Lighting, Inc. v. Hopkins Manufacturing Corp.

Facts

North American Lighting, Inc. manufactured headlamp assemblies for major automobile manufacturers and was required under the Motor Vehicle Safety Act and Federal Motor Vehicle Safety Standard No. 108 to perform daily quality control testing measuring light intensities at sixteen critical checkpoints with no more than ten percent deviation. When NAL’s existing testing equipment broke down in 1989, it contacted Hopkins Manufacturing Corporation after reviewing marketing materials stating that Hopkins’ Machine Vision System could measure light intensities at SAE-specified checkpoints. Hopkins loaned NAL a prototype MVS and provided repeated oral and written assurances that software could be added to enable the system to perform the required testing functions. Based on these assurances, NAL purchased a permanent MVS in June 1989 for $79,548, withholding ten percent pending completion of promised software upgrades. The permanent system arrived in August 1989 but performed poorly, with seventy-four percent of readings falling outside the required ten percent accuracy range over 210 days of testing. Despite NAL’s repeated requests and Hopkins’ acknowledgment of problems, key software upgrades were not made until July 1990, when a Hopkins employee informed NAL the system would never deliver promised results. The MVS failed to power up in late July 1990, and NAL revoked acceptance in June 1991 after continued discussions with Hopkins failed to resolve the issues.