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Dynamic Mach. Works, Inc. v. Mach. & Elec. Consultants, Inc. - 444 Mass. 768, 831 N.E.2d 875 (2005)

Rule:

The Massachusetts version of the Uniform Commercial Code does not define "waiver" or "modification," but they are distinct concepts. Massachusetts common law defines waiver as the "intentional relinquishment of a known right, or, as one commentator has explained, the excuse of the nonoccurrence of or a delay in the occurrence of a condition of a duty. A modification is the changing of the terms of the agreement which may diminish or increase the duty of either party. While a waiver may be effectuated by one party, a modification is the result of the bilateral action of both parties to the sales transaction. By the plain terms of Mass. Gen. Laws ch. 106, § 2-209(5), a waiver is retractable in the absence of reliance. A modification, in contrast, cannot be retracted unilaterally. 

Facts:

In January, 2003, Dynamic agreed to purchase from Machine a Johnford lathe (lathe) for $355,000. The lathe was to be manufactured in Taiwan by Roundtop Machinery Industries, Co., Ltd. Under the terms of Dynamic's purchase order, Machine would receive a down payment of $29,500, a second payment of $148,000 on delivery, which was scheduled for May 15, 2003, and a final payment of $177,500 on acceptance. In the interim, Dynamic rented a Johnford ST-60B lathe (rental lathe) from Machine. In February, 2003, Dynamic informed Machine that it was experiencing problems with the rental lathe and that if these problems were not addressed and remedied in the new lathe, Dynamic would reject it. Sometime before June, 2003, production of the lathe in Taiwan was delayed due to the "SARS" epidemic and other events beyond the control of Machine. In letters dated June 26 and July 8 (collectively the July agreement), Machine and Dynamic confirmed an oral agreement to, among other things, extend the deadline for the installation and commissioning of the lathe to September 19, 2003. The parties further agreed that any further delay would result in a $500 a day penalty assessed against Machine. On October 9, Machine delivered the lathe to Dynamic. It was subsequently installed, and, throughout the month of November, the lathe was tested and readjusted in connection with its final commissioning. On February 20, 2004, Dynamic filed this action in the superior court, seeking a declaratory judgment concerning its rights and remedies under the Uniform Commercial Code, and alleging breach of warranty, breach of contract, and unfair business practices in violation of G. L. c. 93A, § 11. Machine asserted a counterclaim of breach of contract. In October, the district court judge heard Dynamic's motion for summary judgment and Machine's cross motion for partial summary judgment. The judge concluded that "Dynamic properly and timely revoked its December 9, 2003, letter extending the commissioning deadline, thus rendering Machine liable for breach of contract." He further determined that Machine did not violate G. L. c. 93A and that Dynamic was not entitled to recover punitive damages based on the penalty provision in the July 8, 2003, agreement. Nevertheless, the judge certified the question: Under the Massachusetts version of the Uniform Commercial Code, does a buyer have a right to retract a written extension allowing more time for the seller to cure defects in a delivered product absent reliance on the extension by the seller?

Issue:

Under the Massachusetts version of the Uniform Commercial Code, does a buyer have a right to retract a written extension allowing more time for the seller to cure defects in a delivered product absent reliance on the extension by the seller?

Answer:

Yes, under certain conditions

Conclusion:

The Supreme Judicial Court of Massachusetts answered the certified question. It made no ruling on whether the parties agreement was a waiver or a modification of a portion of their sales contract. The court held that if the written extension constitutes a modification of the agreement to purchase the product, then the buyer may not retract it unilaterally. If, on the other hand, the written extension constitutes a waiver of an executory portion of the agreement, the buyer may retract it by reasonable notification received by the seller that strict performance will be required unless the retraction would be unjust in view of a material change of position in reliance on the waiver.

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