Delaware Business Litigation Report

District Court Denies Defendant's Motion for Partial Summary Judgment in Breach of Warranty Action

AES Puerto Rico, L.P. v. ALSTOM Power, Inc., C.A. No. 04-1282-JJF, 2006 WL 1154786 (D. Del. Apr. 28, 2006). Plaintiff alleged that defendant breached an accelerated corrosion warranty in the parties' agreement and that plaintiff suffered damages as a result. Defendant moved for partial summary judgment, claiming that any warranty liability was subject to a condition precedent in the parties' contract, which condition was never met. Plaintiff, AES Puerto Rico, L.P. ("AES") entered into a contract with Duke/Fluor Daniel Carribean S.E. ("Duke") for the construction of a power plant in Puerto Rico. Duke then subcontracted with defendant ALSTOM Power, Inc. ("ALSTOM") to construct two boilers and pollution control equipment for the power plant. ALSTOM entered into an agreement with another company to construct the pollution control equipment. Once the project was completed, Duke assigned its rights under its contract with ALSTOM to AES. During the start-up of the plant, ALSTOM and its subcontractor deviated from the operations manuals for the pollution control equipment, and advised AES to do the same. AES later discovered corrosion in the boiler units constructed by ALSTOM, and immediately reported the corrosion to ALSTOM. ALSTOM initially agreed that the equipment was covered by the accelerated corrosion warranty, but insisted that its subcontractor must pay the claim. ALSTOM later claimed that AES's strict compliance with the operations manual procedures, which had been modified several times, was a condition precedent to any recovery under the accelerated corrosion warranty, and that AES used material that violated the warranty to operate the pollution control equipment. AES filed suit, contending that there was no condition precedent in the contract that would preclude recovery, and that ALSTOM was liable for damages under the warranty. Although the court held that the parties' contract included a condition precedent to recovery under the corrosion warranty, the court also concluded that summary judgment was inappropriate because there were issues of material fact as to whether (1) AES complied with the operating procedures; (2) the operations manual allowed AES to alter maintenance speificiations to meet its needs; (3) AES had operated the pollution control equipment with materials that contributed to the accelerated corrosion; and (4) ALSTOM was estopped from asserting the condition precedent to the warranty in light of its own deviation from the operations manual during the start-up of the plant. Share