Binks Manufacturing Co. v. National Presto Industries, Inc.
709 F.2d 1109 (1983)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under UCC § 2-202 (the parol evidence rule), extrinsic evidence that contradicts or is inconsistent with the express terms of a final written agreement is inadmissible. Additionally, an implied warranty of merchantability under UCC § 2-314 does not arise for unique, custom-manufactured goods that have no established "ordinary purpose" or trade standard.
Facts:
- Presto Manufacturing Company decided to purchase a custom automatic system to coat aluminum castings for its hamburger cookers.
- Presto negotiated with Binks Manufacturing Company from October 1975 to March 1976 for the design and manufacture of the system.
- The resulting contract specified that the system was designed to coat six specific types of parts in listed quantities per hour (e.g., '2,250 pcs./hr.').
- The contract also contained a clause stating, 'The maximum capacity of the system is limited to the above parts...with a maximum loading of 4,500 pounds per hour...'
- Binks delivered the system approximately six weeks after the agreed-upon date of June 2, 1976, due to delays from its oven subcontractor.
- Presto hired its own independent contractors to install the system.
- After installation, the system experienced numerous operational problems and conveyor breakdowns.
- Presto operated the system by 'double loading' the castings, exceeding the specified pieces-per-hour rate but staying within the 4,500 pounds-per-hour weight limit.
Procedural Posture:
- Binks Manufacturing Company sued Presto Manufacturing Company in federal district court to recover the balance of the purchase price for the system.
- Presto filed a $9.5 million counterclaim alleging late delivery, breach of warranties, negligence, and misrepresentation.
- Before trial, the district court granted Binks' motion in limine, precluding Presto from introducing extrinsic (parol) evidence regarding the contract's definition of 'maximum capacity'.
- The district court also ordered Presto to produce two internal memoranda written by its in-house counsel, ruling they were not protected by the work-product privilege.
- At the close of Presto's case, the trial judge granted a directed verdict in favor of Binks on Presto's claim for breach of an implied warranty of merchantability.
- A jury returned verdicts in favor of Binks on its claim for the purchase price and against Presto on all of its counterclaims.
- Presto, as the appellant, appealed the district court's judgment to the U.S. Court of Appeals for the Seventh Circuit.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the parol evidence rule under UCC § 2-202 bar the admission of extrinsic evidence to show that the parties intended a machine's capacity to be defined by weight, when the final written contract explicitly defines capacity for specific parts by the number of pieces per hour?
Opinions:
Majority - Coffey, J.
No. The parol evidence rule under UCC § 2-202 bars the admission of extrinsic evidence that contradicts or is inconsistent with the clear terms of a final written agreement. The court held that Presto's proffered evidence, suggesting the parties intended a weight-based capacity limit, was inconsistent with the contract's explicit, piece-count limitations for the specified parts. Defining 'inconsistency' as 'the absence of reasonable harmony,' the court found that admitting the extrinsic evidence would render the specific numerical terms in the contract meaningless. The court's interpretation harmonized all provisions by applying the piece-count limit to the six specified parts and the weight limit to any other, unspecified parts. The court also affirmed the trial court's other rulings, finding that: 1) internal memos created by Presto's counsel were not prepared 'in anticipation of litigation' and were therefore not protected by the work-product privilege; and 2) no implied warranty of merchantability arose because the unique, custom-built system had no 'ordinary purpose' against which its fitness could be measured.
Analysis:
This decision reinforces the primacy of clear, written terms in commercial contracts under the UCC, narrowly interpreting the exceptions to the parol evidence rule. By defining 'inconsistency' as an 'absence of reasonable harmony,' the court signals that extrinsic evidence cannot be used to nullify or substantially alter specific terms that are unambiguous on their face. The ruling on the implied warranty of merchantability is also significant, establishing that for novel or one-of-a-kind goods, a buyer cannot rely on this warranty because no 'ordinary purpose' or industry standard exists. This places a greater burden on buyers of custom equipment to secure express warranties.
Unlock the full brief for Binks Manufacturing Co. v. National Presto Industries, Inc.