Purchaser’s refusal to complete final acceptance testing prevented vendor from investigating concern

Contracts - Performance or Breach - Terms

Defendant purchaser D Inc. accepted proposal from plaintiff vendor A Inc. for machine (TLL) in metal coil processing. Proposal specified performance standard of elongation of strip up to two per cent, but there was no generally acceptable measure for flatness of metal coil. After TLL was installed, purchaser stopped final testing, allegedly because TLL could not meet contractual performance requirements. Vendor brought action for breach of contract, and purchaser brought counterclaim for breach of contract. Action allowed and counterclaim dismissed. Vendor was awarded $312,936 for unpaid contract price and $97,882 for extras. Contract recognized that there could be failures during final acceptance testing, and provided that vendor would remedy its faults, with failed tests repeated. Purchaser frustrated process by not sharing information with vendor about its concerns about flatness of sheets, and suspended final acceptance testing without following contractual process. There was no quantitative analysis of how many customer complaints were received, how many sheets were affected or what percentage of sheets were defective compared to total production. Purchaser’s refusal to complete final acceptance testing prevented vendor from investigating concerns, making repairs, and ensuring that TLL worked properly. Completing final acceptance testing was condition precedent to determining whether TLL produced memory-free sheets from metal coils, and whether contract should be completed. Purchaser breached final acceptance testing provisions of contract.

Alcos Machinery Inc. v. Del Industrial Metals (2019), 2019 CarswellOnt 2930, 2019 ONSC 1187, Trimble J. (Ont. S.C.J.).

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