Opinion for Dewitt v. Itasca-Mantrap Coop. Elec. Assn., 10 N.W.2d 715, 215 Minn. 551 — Brought to you by Free Law Project, a non-profit dedicated to creating high quality open legal information.
Plaintiff brought action against the Itasca-Mantrap Cooperative Electrical Association hereinafter called the association for a balance due him under a contract for the sale and delivery of poles for the latter’s rural electric distribution system. The association answered, claiming that certain of the poles delivered did not comply with agreed specifications and interposed counterclaims for the cost of replacing them. Defendant Maryland Casualty Company, surety on plaintiff’s performance bond hereinafter called the surety , was impleaded as an additional defendant by the association.
The United States Rural Electrification Administration hereinafter called REA provided funds for the electric system, and its administrator had the right to supervise the performance of the contract and to inspect all materials furnished thereunder. He was required to approve invoices for materials before payment therefor by the association. Plaintiff and the surety demurred to the answers and counterclaims of the association. The demurrers were sustained, and the association was granted leave to amend its answers and counterclaims subsequent to the determination of this appeal.
Second, that plaintiff caused certain brands to be placed on said poles, well knowing such brands to be false and fraudulent, with the intention of deceiving and inducing the association to accept delivery of said poles and to use them in its electric distribution system; that it relied upon such brands and believed them to be correct, and in consequence accepted delivery of said poles and incorporated them into its electric system, to its damage as alleged in the first defense.
The material portions of the contract are as follows: “Inspection. The owner reserves the right to reject at the point of delivery such poles as do not conform to these Specifications, if such condition is demonstrated by examination and pole borings at said location or locations.
The prices of Materials set forth herein include the cost of delivery to Deer River, together with all sums which are or may be payable by the Bidder [plaintiff] or the Owner on account of taxes imposed by any taxing authority upon the sale, purchase or use of the Materials. All materials furnished hereunder shall be subject to theinspection, tests and approval of the Engineer or Inspector ofthe Owner and the Administrator, and the Bidder shall furnish all information required concerning the nature or source of any Materials.
All Materials furnished hereunder shall become the property of the Owner when delivered at the point where delivery is to be made; provided, however, that the Owner or the Administrator may reject any such Materials as do not comply with the Specifications for Materials, before incorporation of such Materials into the Owner’s electric system. Upon any such rejection, the Bidder shall remove the rejected Materials and immediately replace them with materials complying with the Specifications for Materials.
The Bidder will frame all poles in accordance with drawing M20 of the standard REA specifications except class 7 and class 7X poles shall not be gained. All poles shall be branded with length and class in manner satisfactory to the owner’s engineer.
The Bidder shall furnish a pole inspector satisfactoryto the owner who shall work under the supervision of theowner’s engineer. The owner shall have the right to terminatethe inspector’s services without cause should the owner deem necessary for his best interest, whereupon the Bidder shall then be required to furnish a successor or successors as may be required. The material portions of the bond are as follows: “1. Know all men that we, H. It is expressly agreed that this bond shall be deemed amended automatically and immediately, without formal and separate amendment hereto, upon any amendment to the contract, so as to bind the Principal and the Surety to the full and faithful performance of the Contract as so amended, provided only that the total amount of all increases shall not exceed 20 percent of the amount of the total price set forth in that part of the Contract entitled Proposal.
The term ‘amendment’, wherever used in this bond, and whether referring to this bond, the Contract or the Loan Contract, shall include any alteration, addition, extension, modification, amendment, rescission, waiver, release or annulment, of any character whatsoever. The Surety hereby acknowledges receipt of notice of any amendment, indulgence or forebearance, made, granted or permitted. Plaintiff’s demurrer was based upon the ground that the answers did not state facts sufficient to constitute a defense and that the counterclaims did not state a cause of action.
The demurrer of the impleaded surety was based on the ground that the answers did not state facts sufficient to constitute a defense to plaintiff’s action and that the counterclaims were not proper under Minn. Plaintiff contends that the parties had agreed upon and provided an exclusive remedy in their contract, which required the association to inspect the poles at the point of delivery and to reject defective ones there, or, in any event, prior to their incorporation into the system, and that hence the defenses and counterclaims set up by the association were improper.
The demurrer of the surety was sustained upon the ground that its surety bond was one for performance and its liability thereunder contingent upon liability first being established against plaintiff; that paragraph 7 of the contract governed the association’s remedies, and that plaintiff, in executing said bond as principal, had not, in effect, amended or altered the original contract so as to waive his rights under said paragraph. The association on this appeal claims error in the following: 1 That paragraph 7 of the contract does not exclude other remedies of the association for breach of contract; 2 that if said paragraph be construed as exclusive of other remedies, nevertheless plaintiff’s conduct in incorrectly branding the logs constituted fraud on his part which induced the association to accept and incorporate into its system said defective poles, and that, accordingly, such conduct excused the association from rejecting the defective poles as required by paragraph 7; 3 that the surety bond, and in particular paragraph 4 thereof, constituted an amendment to the contract, whereby it was agreed that the association’s failure to comply with the provisions of paragraph 7 of the contract did not bar it from resorting to other remedies for any breach thereof.
The association asserts that the remedy provided for in paragraph 7, while authorizing certain procedure in the event the contract was not properly performed, was not exclusive, and that under the contract it might resort to other remedies for breach thereof, notwithstanding that paragraph. The reason for this is obvious. If such defects were ascertained and plaintiff notified thereof at the point of delivery, or prior to the incorporation of such material into the association’s system, it would then be easy and economical for plaintiff to substitute new material for that rejected.
In the case of Morris Co. Power Mfg. Therein, although the contract did not specify that the remedy there provided was exclusive, the court so construed it in the following language: “The contract does not say in terms that, in the event the engine proved defective or incapable of doing the work, the plaintiff should have no other remedy than the right to require the seller to replace it or take it back and refund the purchase price.
It does, however, specifically provide in that contingency for replacement by an engine that would meet the requirements or for a refund of such part of the purchase price as had been paid. It thus provides for the doing of certain things as the specific remedy available to the buyer and enforceable against the seller for a breach of the guaranty. This was agreed upon after thorough consideration of all the terms of the contract, and because of plaintiff’s dissatisfaction with the original guaranty including the measure of liability.
It seems clear to us that it was intended to be exclusive. It is admitted by the pleadings that it did not avail itself of the remedy provided within the time permitted; and hence, unless some fraudulent act of the plaintiff induced the association to waive its rights thereunder, it is clear that such paragraph bars it from asserting damages herein or pursuing other remedies for breach of the contract. It is true that what constitutes a reasonable time for rejection of defective merchandise in cases of this kind is, under Minn.
As stated in Laundry Service Co. Fidelity Laundry M.
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