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Contracts Keyed to Kuney
United States v. Wegematic Corp.
Citation:360 F.2d 674 (1966).
In June 1956, the Federal Reserve Board invited five electronics manufacturers to submit proposals for a computer system. Defendant submitted a proposal for the sale and lease of its new computer, the ALWAC 800. Defendant positioned the machine as a “revolutionary system” with minimized maintenance problems due to its “use of highly reliable magnetic cores.” In September, the Board accepted defendant’s proposal and ordered the components for $231,800 with delivery to be made on June 30, 1957. The contract included a liquidated damages clause of $100 per day for delay and a provision which held defendant liable for any excess costs in the event the Board needed to procure services elsewhere.
Beginning in March 1957, defendant suggested that delivery of the computer system may be postponed and by April defendant advised that delivery would be made on October 30. The delay in delivery was apparently caused by the necessity to “redesign” in order to “improve” the equipment. On August 30, defendant advised that delivery may be delayed into 1959. Eventually, in October, defendant informed the Board that it would not be delivering the system and requested cancellation of the contract. On October 6, 1958, International Business Machines Corporation (IBM) delivered a computer to the Board at a rental cost of $102,000 per year with an option to purchase for $410,450.
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