Aqua Marine Products v. Pathe Computer Control

Citation: Aqua Marine Prods., Inc. v. Pathe Computer Control Sys. Corp., 229 N.J. Super. 264, 551 A.2d 195 (1988).

Factual Background
Appellee, Aqua Marine Products (“Aqua Marine”), is a marine supplier that sells custom-made textile products, including quilted bedspreads and comforters. One of the specialty items sold by Aqua Marine included outline quilted products. Outline quilting is an expensive, time-consuming, hand-sewn technique that follows the outline of the design already imprinted on the fabric.

In 1984, Aqua Marine heard of a machine that had the capability of automatic outline quilting. Several months later, in May 1985, appellee’s telephoned the appellant, Pathe Computer Control Systems (“Pathe”), to confirm that the company did, in fact, manufacture automatic outline quilters. Pathe confirmed that it did and set up an appointment for Aqua Marine to visit the plant and see the machine in person.

After visiting the appellant’s plant and seeing the machine for themselves, Aqua Marine decided to purchase the machine. Aqua Marine entered into a contract for the purchase of the “Pathe Model SDI50000 Computer Controlled Single Needle Quilting Machine” for $75,000.00. The contract, which was signed on August 16, 1985, provided that the shipment of the machine would occur in 90 to 120 days after payment of 1/3 of the deposit and, in addition, allowed Pathe to retain the deposit as liquidated damages in the event that Aqua Marine breached the agreement.

Several months after signing the contract, Aqua Marine decided that they would “need some device to feed and recover the fabric on a roll.” Since the original contract did not provide for such a device, Aqua Marine contacted Pathe and signed a separate contract for a Roll Fed Fabric Handling System to be used with the Single Needle Quilting Machine for an additional $4,000.00. Pathe informed Aqua Marine that it would begin testing the Roll Feed attachment within two weeks at which point they would contact Aqua Marine to visit the plant.

In February 1986, Aqua Marine traveled to Pathe’s headquarters check on the status of the Roll Feed attachment. Aqua Marine noticed that the machines head did not allow quilting close enough to the edges. Aqua Marine informed Pathe of this problem and informed them they would return to check on the roll feed’s progress.

On April 29th, Aqua Marine made another visit to the plant to see if any improvement to the Roll Feed had been made. Upon arrival, Aqua Marine was told that there were “software problems” with the machine and that Pathe was going to have to “go back to ground zero and affect some type of retrace system.” Upon learning this, Aqua Marine determined that Pathe lacked the capacity to produce the machine. Subsequently, Aqua Marine canceled its entire order with Pathe and demanded the return of its deposit.

Pathe refused and, as a result, Aqua Marine brought suit for breach of contract.

Trial Court Proceedings
The district court entered judgment based on the determination that there were two contracts at issue: one for the sale of the machine itself and one for the roll feed attachment. The court determined that Pathe had breached the first contract for failing to deliver the machine within the 90-120 day time frame. Conversely, the court determined that Aqua Marine had breached its contract with Pathe for the sale of the roll feed. Accordingly, the trial judge set off the $4,000.00 price for the roll-feed attachment against the deposit Aqua Marine made for the machine. The court entered judgment for the plaintiff in the sum of the difference between the deposit and the roll fee plus prejudgment interest.

Pathe appealed, claimming that the trial judge erred in concluding that the parties had entered into two separate contracts and that, in any case, the verdict was against the great weight of the evidence.

Appellate Court Proceedings
The appellate court reversed the trial court's holding, and entered an order a new trial. In arriving at this conclusion, the court analyzed the lower court's finding that there were two separate contracts. The court determined that there was only a single contract. This conclusion was based on the “relatively informal manner” of the relationship as well as the fact that the [[contract]s were for two components of a single complex machine, not two separate pieces of equipment.

Therefore, the court determined that the trial court had failed to make specific findings necessary to the case. Since the appellate court's findings were in direct conflict with findings that were already in the record, remanding the case back to the trial court would be inappropriate. Therefore, in order to provide a remedy for the “fundamental misapplication of law by the trial judge respecting the nature of the contract,” a new trial was necessary.