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.

Questions:

1. Is Marley obligated to pay the backcharges?

2. What two issues does this case raise?

3. What sections of the UCC does the court look at to resolve these issues? 

4. Could the parties orally modify the contract?

5. Marley indicated some willingness to resolve the dispute. Did its conduct constitute waiver of the modification prohibition?

6. Why not?

7. Why isn’t the evidence sufficient to prove that Marley waived the prohibition on modification?