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Question: Caldwell agreed with Duke/Fluor Daniel (D/


Caldwell agreed with Duke/Fluor Daniel (D/FD) to install a power plant cooling system in Aiken, South Carolina. The contract stated that Caldwell would pay liquidated damages of $5,000 per day if the system was late. Marley agreed to ship to Caldwell all of the material and equipment needed to build the cooling system, and to deliver it no later than April 1. Their contract disclaimed either party’s liability for consequential and liquidated damages and required any modification be in writing.
Marley delivered its material almost two months late, making Caldwell late in its obligations to build the cooling system. D/FD assessed Caldwell liquidated damages of $135,000. Caldwell attempted to pass this cost, which it called “backcharges,” on to Marley by paying $135,000 less than Marley’s invoice demanded.
Marley sent Caldwell a letter, stating “We would like to work with you to resolve this issue. However, before we can agree to these backcharges, we must have [certain specified] documents.” Caldwell supplied the documents plus a change order indicating that Marley accepted the backcharges once it was signed by both Caldwell and Marley. A Marley executive agreed orally to accept the charges, but Marley never signed or returned the change order and later rejected the charges. Caldwell refused to pay the full contract price and Marley sued.
You Be the Judge: Is Marley obligated to pay the backcharges?
Holding: Marley wins. Excerpts from the court’s opinion: The contract expressly prohibited oral modifications, and there was no written modification. Caldwell’s only hope is that Marley waived the writing requirement. But Marley’s conduct did not amount to a waiver. Yes, there was some evidence that Marley orally agreed to modify. The telephone call is Caldwell’s best evidence. However, when balanced against the contractual requirement of a writing, and Marley’s refusal to execute a written modification, one phone call is not enough to create a waiver. (The court also expressed amazement that Caldwell would agree to a $5,000 per day liquidated damage clause while not taking any steps to protect itself, such as insurance, or a corresponding clause in the contract with Marley.)

Required:
a. What two issues does this case raise?
b. What sections of the UCC does the court look at to resolve these issues?
c. Could the parties orally modify the contract?
d. Marley indicated some willingness to resolve the dispute. Did its conduct constitute waiver of the modification prohibition?


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2.99

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