and 121 New York State Reporter

tract and the said order, and directed the defendant to go on and complete the wrenches so cast, and make them up in full nickel finish instead of the blue finish, or plain finish, as called for by the contract; that the defendant, acting under the said instructions, proceeded to complete the wrenches as directed by Stokes; and that if the wrenches tendered to the plaintiff, and the wrenches so delivered, were different or in any particular varied from the samples as called for by the contract, it was not the fault of the defendant, but was the fault of the said Stokes.

Upon the trial Stokes (plaintiff's assignor) testified that prior to the making of the contract the defendant's president stated that the wrenches called for by the contract would be manufactured and delivered in six to eight weeks, and introduced in evidence a letter from the defendant, dated February 5, 1897, in which it was said: "We are in excellent shape to take hold of a job of this character, and can make deliveries in about eight to ten weeks from receipt of order." Subsequently, on the 6th of March, 1897, the contract in question was executed, and Stokes paid $500 to the defendant, and subsequently paid to defendant for the tools manufactured by it $1,500. Stokes further testified that the dates of the delivery of wrenches were May 22d, 1 wrench; May 24th, 8 wrenches; June 2d, 60 wrenches; that the first delivery in quantity was on August 6th, of 512 wrenches, and so on down to October, when it would seem that the last delivery of 500 wrenches was made; that on June 7th there were returned to the defendant 29 wrenches; that no wrenches were received from the defendant after November 9th; that neither the $500 paid upon the execution of the contract nor the $1,500 paid by the plaintiff or Stokes to the defendant have ever been repaid; that the plaintiff also paid to the defendant the net sum of $646 for the wrenches delivered. Upon cross-examination Stokes testified that he had a wooden model of the wrench at the time he went to see the defendant; that he submitted this wooden model to the defendant, who stated that they could improve upon it, and that they subsequently made an improved model, which was approved by Stokes. There was also the testimony of an engineer who tested the wrenches furnished by the defendant under this contract, and who testified to the defects and variations from the model.

There can be no question, I think, but that the verdict of the jury that there was a breach of the contract by the defendant was justified, and the only substantial question is as to the correct measure of damages. This was, I think, a contract to manufacture and deliver, and not a sale by sample. When the contract was made there were no goods in existence a sample of which was produced, and upon which a sale was made. A wooden model was produced by the plaintiff's assignor, and submitted to the defendant, upon which the contract was made. It was then understood, however, that this model was to be improved upon, and the parties contemplated that the article to be manufactured should correspond with a model to be thereafter manufactured by defendant and approved by the plaintiff's assignor. Such a model was subsequently produced by the defendant and approved, and the defendant proceeded with the execution of the contract based upon this approved model. The case of Gurney v. Atlantic & G. W.

Ry. Co., 58 N. Y. 358, discusses the rules applicable to a contract of this kind, and the rights and obligations of the respective parties. It was there said:

"The substance of the arrangement was that Naylor & Co. agreed to procure to be manufactured a quality of frogs, to correspond with the pattern, and deliver the same to the railway company as desired; in other words, it was an executory contract for the manufacture and delivery of certain articles of personal property of a specified quality and description. It was not strictly a sale by sample. Such a sale contemplates that the goods are in esse, that the sample is taken from the bulk, and that the latter is equal in quality to the sample. This is sometimes called an implied warranty, but it is more properly an express warranty. It amounts to an affirmation that the specimen is a fair sample of the bulk of the commodity. The general rule is, when articles are sold upon an executory contract like the one in question, that the delivery and acceptance of the articles after examination, or an opportunity to examine them, is a consent of agreement that the articles correspond with the contract, and precludes a recovery for any defects which may exist. The vendee must immediately rescind the contract, and return or offer to return the goods. He cannot retain the property, and afterward claim damages by action or recoupment for inferior quality. Such a transaction differs from a sale with warranty in that the stipulated quality is a part of the contract itself, and not collateral to it. In the latter case the vendee is not bound to return the property, but may retain it, and sue upon the collateral agreement."

This rule has been recognized in all the subsequent cases. In Zabriskie v. C. V. R. R. Co., 131 N. Y. 72, 29 N. E. 1006, it was said: "In cases of the latter character [executory contracts for the manufacture and sale or delivery of goods of a particular description], where the quality of goods is capable of discovery upon inspection, and where, after full opportunity for such inspection, the goods are accepted, and no warranty attends the sale, the vendee is precluded from recovering damages for any variation between the goods delivered and those described in the contract."

In Pierson v. Crooks, 115 N. Y. 539, 22 N. E. 349, 12 Am. St. Rep. 831, it is said:

"There is no dispute as to the rule of law touching the rights of parties under an executory contract for the future sale and delivery of goods of a specified quality in the absence of express warranty. The quality is a part of the description of the thing agreed to be sold, and the vendor is bound to furnish articles corresponding with the description. If he tenders articles of an inferior quality, the purchaser is not bound to accept them. But, if he does accept them, he is, in the absence of fraud, deemed to have assented that they correspond with the description, and is concluded from subsequently questioning it. This imposes upon the vendee the duty of inspection before acceptance, if he desires to save his rights in case the goods are of inferior quality."

This presents, we think, the true rule to be applied in determining the measure of the plaintiff's damages. Here the defendant proceeded in the execution of the contract. It delivered 2,000 out of the 10,000 wrenches which it agreed to manufacture and deliver. A portion of these wrenches was accepted by the plaintiff, and a portion returned to the defendant as not in compliance with the contract. As to the portion accepted, there can be no recovery because of the inferior quality of the articles accepted. As to the portion returned by the plaintiff to the defendant as inferior, so far as they have been paid for, the plaintiff would be entitled to recover the amount that he has paid for the ones returned. I cannot find, however, that it appears that plaintiff paid for the wrenches that he returned to the defendant. The plaintiff was also

and 121 New York State Reporter

entitled to recover for any damages sustained in consequence of a breach of the contract to manufacture and deliver the 8,000 wrenches that the defendant has failed to deliver. Where the articles to be manufactured and delivered have a market value, the measure of damages for a breach of the contract, where the manufacturer fails to deliver the articles that he has agreed to deliver, is the difference between the market value of the articles to be delivered and the contract price to be paid to the manufacturer. Where, however, there is no market value, the rule of damages is the difference between the value of the articles to the vendee, if they had been delivered, and the price that the plaintiff was to pay therefor, to be ascertained by the jury upon the evidence.

As was said in Murray v. Stanton, 99 Mass. 345:

"Where there is 'a market value,' it shows that the price at which either party may have relief from the consequences of the default of the other, and therefore it properly shows his damages; but, when there is no such standard, the damages must be estimated from other means of valuation."

In Parsons v. Sutton, 66 N. Y. 92, Judge Earl says:

"The ordinary rule of damages in such case is, as already stated, the difference between the contract price and the market price at the time and place of delivery. When the buyer can go into the market and buy the article which the seller has failed to deliver, this is the only rule, as it offers the buyer full indemnity. If there is no market for the article where it is to be delivered, and it cannot be had there with reasonable diligence, and the buyer suffers damages because of the seller's failure to deliver, which is the proximate and natural consequence of such failure, such damages can be recovered."

In Booth v. Spuyten Duyvil Rolling Mill Co., 60 N. Y. 492, the court say:

"For a breach of an executory contract to sell and deliver personal property the measure of damages is, ordinarily, the difference between the contract price and the market value of the article at the time and place of delivery.

*

It is expressly found that there is no market price for the steel caps, and it does not appear that there was any market price for the completed rail. The presumption is, from the facts proved, that there was not. It was a new article, and the contract was made to bring it into use."

These remarks apply to this contract, and, there being no market value of the articles to be manufactured, the plaintiff was entitled to recover such damages as the jury should find it sustained by reason of the failure to deliver the articles agreed to be delivered, based upon the fair value of the articles to the plaintiff, had they been delivered, less. the amount that they were to pay the defendant for the articles when manufactured and delivered, and that question was to be submitted to the jury and determined by them upon the evidence. As we held upon the former appeal, the plaintiff was also entitled to recover the $500 paid upon the execution of the contract, which was to be applied upon the last 10,000 wrenches to be manufactured and delivered.

The remaining question is as to the right to recover the amount paid by the plaintiff to the defendant for the tools manufactured by the defendant for the purpose of carrying out the contract. The contract provided that "the tools necessary for making these wrenches, amounting to fifteen hundred dollars ($1,500), the party of the first part agrees to settle for on presentation of weekly bills, and full inventory of tools to be furnished by the party of the second part," and it is

conceded that the plaintiff had paid the defendant the $1,500 for the tools necessary for making these wrenches. Rose, an engineer and mechanic, who represented the plaintiff, testified that a day or two before he was examined he went to the defendant and made a demand for these tools; that the tools were afterwards delivered to him, and that these tools were afterwards examined by an expert for the plaintiff. This expert testified that he was familiar with the proper kind of tools for the making of first-class wrenches of this kind; that he examined the tools furnished by the defendant for the manufacture of these wrenches; that he found that a portion of the cutters were worn and broken, and found other defects in them, which he specified; that it was the character of these tools that caused the varying thickness between the top and lower sides of the sleeve of the wrench, which constituted one of the defects pointed out by him in the wrenches that had been delivered to the plaintiff; that "the method of making the sleeve, as far as I am able to judge from the tools, was such that with those tools the forming of the space through which the shank passes could not be made uniform, and that is evident by the fact that none of the sleeves are uniform. I found that all the tools that I could apply to the making of any portion of this wrench generally had that defect, that they were not positive, and they were not built in such a way that the same result would be produced on each wrench that was made with those tools. * * * Those tools will not make wrenches like the model sample wrench. There is no other reason, other than those I have given; but the tools are not made in such a way that they will produce a uniform article. It is hit or miss whether the sleeve comes out one way or comes out another way, due to the way the tools are made, and the operation of the tools.

Upon this evidence, I think it would be a question for the jury to say whether these tools, as described by this witness, were a compliance with the contract; and, if not such a compliance, the plaintiff would then be entitled to recover from the defendant the amount that it had paid for the tools. There had been no acceptance by the plaintiff of the tools that were manufactured for it by the defendant, as the tools had never been delivered to the plaintiff, except a day or two before the trial, and then merely for the purpose of examination.

This being, we think, the rule of damage, we are now to determine whether, in submitting the question to the jury, the court observed these rules, or whether there was error that requires us to reverse the judgment. Upon the question of damages, the court charged the jury that:

"If you find, however, that he (defendant) has not complied with it (the contract), and that he has failed to perform his contract in the particulars which have been specified, then you come to the question of how much the plaintiff is entitled to recover. He would be entitled to recover, first of all, the $500 which he has paid, and which was to be applied as the past payment upon the last thousand of the wrenches to be manufactured. There is one other feature of this case. If you find that these wrenches which were furnished were defective, and were not in accordance with the terms of the contract, then the plaintiff is entitled to recover the sum that he has paid for them. He has testified that he paid the sum of $646, I think, and to the extent that they were depreciated by reason of these defects he is entitled to recover it back. If you find that they were entirely valueless, he is entitled to recover the whole of it.

and 121 New York State Reporter

If you do not find that, but find there was some damage, he is entitled to recover such portion of that as you find he has sustained injury. Another feature of it: Under the contract the defendant was to furnish but the plaintiff was to pay $1,500 for suitable machinery. This machinery was to be delivered to the plaintiff upon the completion of the contract. After the 10,000 wrenches had been made the machinery was to be delivered, and was to belong to the plaintiff. Plaintiff has paid for the machinery $1,500, and he complains now that it is not the proper machinery for the purpose for which it was manufactured, and he has called your attention to the evidence which he says justifies that claim; that the work itself shows that it was not proper machinery. One witness, at least, has testified that it was not proper machinery, and that it was not such machinery as was proper to manufacture this kind of work. If you find that is so, then the plaintiff is entitled to recover the $1,500 which he has paid for the machinery. * The three elements, as I understand, that the plaintiff claims as damages, are, first, the $500 which he paid at the inception of the contract; the $1,500 for the machinery, and the $646 of the balance which he had paid for the wrenches; the entire payment being $946, but there being 500 of those wrenches that were retained by the plaintiff, upon which there was an allowance of 60 cents each, making the sum of $300, which would be deducted from the $946, leaving $646 as the amount that plaintiff had actually paid."

It was undoubtedly error to charge that the plaintiff was entitled to recover the sum of $646 if the jury found that the wrenches that had been delivered to the plaintiff were entirely valueless, as the plaintiff, by accepting those wrenches, was precluded from questioning the quality of those delivered and accepted as a compliance with the contract. Upon the evidence the jury would have been justified in finding that the tools were not such as it was contemplated should be manufactured and paid for by the plaintiff; and, if that is so, I think the plaintiff was entitled to recover the $1,500 paid by the plaintiff to the defendant for the tools. After the charge of the court, counsel for the defendant stated, "I desire to except to so much of your honor's charge as states that the plaintiff is entitled to recover damages for the wrenches that he has on hand;" in reply to which the court said, "I will hold that this was a warranty to manufacture according to sample, and that being so he had a right to reject it at any time;" to which counsel for the defendant said, "I take an exception." As the plaintiff was not entitled to recover for the wrenches that had been delivered and accepted by him, this was error, and the verdict cannot be sustained. The learned trial judge fell into this error in consequence of a clause in the opinion on the former appeal in which it was stated: "As we view the contract, the sale was by sample, and there was a warranty that the wrenches would substantially conform to the sample, and this warranty survived acceptance." But that was an inadvertence, and is not the true construction of this contract, we think is established by the authorities before cited. It was not intended by the court to hold that this was, strictly speaking, a sale by sample, or that there was any warranty, express or implied, that survived the acceptance of the article to be manufactured by the plaintiff.

Neither the case of Zabriskie v. C. V. R. R. Co., 131 N. Y. 72, 29 N. E. 1006, nor Brigg v. Hilton, 99 N. Y. 519, 3 N. E. 51, 52 Am. Rep. 63, cited to sustain that proposition, is applicable to such a contract as that before us. In the Zabriskie Case the contract was for a certain quality of coal sold and delivered by the defendant under a written contract whereby "the said vendors agreed to sell and deliver to the