Creusot-Loire International, Inc. v. Coppus Engineerong Corp. (S.D.N.Y.)

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Facts.  Creusot-Loire International, Inc. (Creusot-Loire), is a French manufacturing and
engineering concern that owns and operates ammonia plants in Yugoslavia and other
countries. In the fall of 1978, Creusot-Loire sent specifications for burners to be used at
its Yugoslavia plant to Coppus Engineering Corporation (Coppus), an American
company that manufactured such burners. In response, Coppus mailed back technical
specifications and price information for the burners and expressly warranted that its
burners were capable of meeting Creusot-Loire's specifications, including continuous
operations at high temperatures using heavy fuel oil. Relying on this information,
Creusot-Loire issued a purchaser order and paid $175,568 to Coppus for the burners.
        In November 1979, Creusot-Loire became aware of operational difficulties with
similar burners installed by Coppus in an ammonia plant in Sri Lanka. It became clear that
the burners overheated when using heavy fuel oil and that efforts to modify the burners to
correct the problem were futile. Creusot-Loire wrote to Coppus stating that it would
accept the burners only if Coppus would provide contractual and financial assurances of
performance. When Coppus refused this request and Creusot-Loire's demands for a
refund, Creusot-Loire sued Coppus for breach of contract.

Issue.
Was Creusot-Loire justified in demanding adequate assurance of performance from
Coppus Engineering?

Opinion. Cannella, Senior District Judge.  The court agrees with plaintiff Creusot-
Loire that the operating specifications for Sri Lanka and Yugoslavia were sufficiently
similar to give plaintiff reasonable grounds for insecurity. Three of defendant's employees
have stated or represented that the operating conditions for the Yugoslavian and Sri Lanka
plants are similar. Thus, the court finds unpersuasive defendant's claim that the two
plants are different.
        Turning to defendant's claim that plaintiff's request for assurances was
unreasonable, the court notes that defendant promised to do more than just deliver the
burners. The contract plainly states that defendant was obligated to provide burners that
would operate under certain conditions. The present record establishes that plaintiff was
justified in seeking assurances that the burners were able to meet the Yugoslavian
operating specifications. As the Official Comment to N.Y.U.C.C. Section 2-609
recognizes, a buyer of precision parts has reasonable grounds for insecurity if he
discovers that his seller is making defective deliveries of such parts to other buyers with
similar needs. Thus, plaintiff was justified in seeking assurances from defendant. The
defendant's failure to provide any assurances constitutes a repudiation of the contract.

Holding.  The district court held that Creusot-Loire was justified in demanding adequate
assurance of performance and that Coppus repudiated the sales contract when it failed to
provide such assurances. The court entered judgment for Creusot-Loire and ordered


Coppus to refund the purchase price plus incidental damages, a total of $242,335.
Case Questions
Ethics
.  Did Coppus act ethically in failing to respond to Creusot-Loire's request for
assurances?
Policy.  Does the rule of adequate assurances serve any useful purposes? Explain.
Business Implication.  What would the economic consequences have been if the burners
were delivered and installed, but failed to meet Creusot-Loire's requirements?




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