Full opinion text
OPINION AND ORDER EDWARD R. BECKER, District Judge. I. Preliminary Statement This matter is presently before us on the motion of third-party defendant General Electric Company (GE) for partial summary judgment. The original defendant, Pennsylvania Power and Light Company (PP&L), is a public utility which furnishes electric power to large areas of eastern and central Pennsylvania. Brunner Island in the Susquehanna River south of Harrisburg, Pennsylvania is the site of a large PP&L power plant complex. In 1964, recognizing the need to augment its generating capacity to meet the growing electric power needs of consumers and of industry, PP&L determined to erect an additional generating plant on Brunner Island to be known as Brunner Island # 3. On previous occasions PP&L had superintended the erection of its own power plants, letting various contracts and subcontracts for the several portions of the work. However, on this occasion the decision was made to engage Ebasco Services, Inc. (Ebasco), the original plaintiff herein, as a contractor, to undertake complete responsibility for construction of the plant on a so-called “turnkey basis”; i. e., Ebasco was to assume the responsibility for design, selecting appropriate equipment and contractors, supervising the construction and testing, obtaining appropriate performance guarantees and overseeing all aspects of the project until the plant became operational, at which time the key might be turned over, as it were, to the owner PP&L. The PP&LEbasco agreement, entered into in 1964, was formally executed on March 10, 1966. Under the terms of the agreement PP&L was to pay Ebasco a total of $54,300,000 in installments over the construction period, with $3,640,000 retainage to be paid by PP&L only after it was satisfied that Ebasco had fulfilled the performance guarantees in the contract. In March, 1964, Ebasco began the process of obtaining subcontractors for the plant. The remaining parties to this action, GE, Foster Wheeler Company (Foster Wheeler) and Combustion Engineering Company (Combustion), are firms which were engaged by Ebasco to furnish and install major components of the power plant. GE’s principal contractual undertaking was to supply the steam turbine generator and boiler feed pump turbines, which could fairly be described as the heart of the power plant. The power plant was ultimately completed in 1970. This litigation was commenced by Ebasco seeking some $1 million in retention moneys which PP&L had refused to disburse, plus an additional $1.6 million in expenses which Ebasco claimed it had incurred at PP&L’s request, above the contract specification. PP&L counterclaimed against Ebasco for damages allegedly resulting from delay, use of unauthorized bidders, breach of warranty and negligence. PP&L, as third-party plaintiff, also joined GE, Foster Wheeler and Combustion as third-party defendants on its counterclaim. PP&L’s counterclaim against GE seeks damages allegedly resulting from (1) furnishing defective equipment; (2) negligence in the design and supervision of the installation of the steam turbine generator and boiler feed pump turbines; (3) breach of implied warranties; and (4) tortious interference by GE with certain of PP&L’s contract rights. The total damages asserted by PP&L in its counterclaim approximate $64 million. The largest single element of damages is PP&L’s claim against GE for the cost to PP&L of purchasing replacement power from other power companies in the Pennsylvania-New Jersey-Maryland Interconnection when Brunner # 3 did not function as anticipated. The litigation has become labyrinthine. It has also become massive in scope; indeed, there have already been produced for discovery some 100,000 documents, and depositions consuming hundreds of days have been taken. The present opinion addresses the motion of GE for partial summary judgment as to PP&L’s claim against GE for alleged problems with the steam turbine generator and boiler feed pump turbines. More specifically, GE seeks to have us declare that it is not liable to PP&L on the steam turbine generator and boiler feed pump turbine contracts for: (1) cost of replacement power or lost profits; (2) breach of an alleged implied warranty of fitness for an intended use; and (3) tortious interference with the contractual rights of PP&L. Our decision on the motion must, of course, turn solely on the determination of whether genuine issues of material fact exist on the questions involved. The issues with which the motion deals evolve in large measure from the differing views of the parties as to what documents or acts form the contract between GE and Ebaseo (the latter acting as agent for PP&L), and as to the terms of that contract. A brief preliminary background discussion is necessary in order to place the motion in perspective. On July 15, 1964, acting pursuant to Ebasco’s request, GE issued quotations for the steam turbine generator and the boiler feed pump turbines by means of a letter to Ebasco which stated, inter alia: “The above prices are based on our Standard Conditions of sale, price policy and price data as shown in GE Handbook 4710, dated May 25, 1964.” Six days later Ebasco placed purchase order NY-668001 for the generator and turbines and accompanied that order with a letter reading, in part: “A formal contract will be issued at a later date containing the terms and conditions of, and in the format of, the usual type of contract issued by Ebasco.” The GE terms and conditions differed significantly from those in the Ebasco standard contract in such important areas as warranties and remedies available to Ebasco (and therefore to its principal, PP&L), and negotiations continued between Ebasco and GE on these issues until December, 1967. At that time agreement was reached on language governing warranties and remedies, and the agreed upon language was included in Supplement 16 to the contract executed by GE and Ebasco on December 7, 1967. Significantly, while the negotiations were proceeding, GE had begun construction of the generator and by late 1967 that unit was nearing completion and delivery. We have held an extensive hearing on GE’s motion and have received voluminous briefs from both GE and PP&L with respect thereto. The main points at issue are; 1. Is the language of limitation contained in Supplement 16 sufficient to insulate GE from PP&L’s claims for cost of replacement power and lost profits and from claims predicated upon alleged breach of implied warranty? 2. Is there a genuine issue of material fact on the question whether PP&L obtained contractual rights pursuant to § 2-207 of the Uniform Commercial Code (U.C.C.) by virtue of the GE quotation of July 15, 1964, the Ebasco purchase order of July 21, 1964, and the events occurring thereafter but prior to December 7, 1967, the date upon which Supplement 16 was executed. If the foregoing question is answered affirmatively, the question then arises as to whether Ebasco had authority to impair PP&L’s § 2-207 rights by executing Supplement 16. Put differently, is there a genuine issue of material fact as to whether PP&L is even bound by Supplement 16? 3. Is there a genuine issue of material fact on the question whether GE tortiously interfered with the contractual and/or fiduciary relationship between PP&L and Ebasco; and if there is a genuine issue of material fact on the question of tortious interference, is there also a genuine issue of material fact on the question of GE’s privilege to interfere? . The first question posed (i. e., sufficiency of the language of limitation in Supplement 16) presents a matter of contractual interpretation which is for the Court. Pittsburgh Ry. v. Equitable Life Assurance Soc’y, 288 F.2d 640 (3d Cir. 1961). The remaining questions require that we determine whether genuine issues of material fact exist, thus precluding the grant of partial summary judgment on those matters. The parties have dwelled longest on the proper construction of the language of limitation in Supplement 16, though that problem causes us the least difficulty. Notwithstanding the able, often ingenious arguments of PP&L, we are satisfied beyond peradventure that the language of Supplement 16 excludes claims for replacement power, lost profits, and breach of implied warranties. Indeed, although there are other clauses from which an argument contra can be constructed, we find it difficult to conceive how the contract — and particularly Supplement 16 —could have more clearly excluded these claims. However, partial summary judgment in GE’s favor does not automatically follow, for we believe that there is a genuine issue of material fact: (1) on the question of whether PP&L obtained contract right pursuant to U.C.C. § 2-207 by virtue of the GE quotation, the PP&L purchase order and subsequent events; and (2) as to whether Ebasco possessed the authority to impair any such rights that may have existed, i. e., as to whether PP&L is bound by Supplement 16. Accordingly, with respect to PP&L’s contractual claims against GE on NY-668001, partial summary judgment must be denied. The remaining issue is tortious interference. On that point, we conclude that there exists a genuine issue of material fact on PP&L’s tortious interference claim and on GE’s defense of privilege thereto. This means that GE’s motion for partial summary judgment as to the tortious interference claim must also be denied. However, on the record as it now stands, there appears a question as to PP&L’s ability to prove at trial that a § 2-207 contract was ever created or that Ebasco lacked authority to negotiate Supplement 16. And if a fact finder were to determine either that a § 2-207 contract was never formed or that Ebasco possessed the requisite authority to execute Supplement 16, we would, because of our construction of that Supplement enter judgment for GE on all claims for cost of replacement power, lost profits and any other damage arising from breach of implied warranty. Moreover, much of the evidence which will bear upon the existence of a § 2-207 contract and Ebasco’s authority to execute Supplement 16 would also be relevant to determination of that facet of PP&L’s counterclaim which seeks to recover cost of replacement power as a function of GE’s alleged interference with the contractual and/or fiduciary relationship between PP&L and Ebasco. Many of the individuals who would testify on such issues would also be witnesses with respect to such factual issues as may survive the partial summary judgment motions of Foster-Wheeler and Combustion Engineering and the second partial summary judgment motion of GE, all of which are presently pending before us and which constitute the next order of business in this case. In view of the enormous complexity of this litigation, and the significant extent to which total trial time might be reduced if the § 2-207 or authority issues are resolved in favor of GE, we have considered exercising the broad litigation management powers accorded to us to by Federal Rule of Civil Procedure 16 and scheduling an early trial on those issues and such other issues as may be closely related thereto: i. e., the tortious interference claim, and perhaps all of the contractual (as opposed to technical) issues in the case. We will hear from counsel at a special pretrial conference to be held on September 8,1975, at 10:30 a. m. to discuss this subject. We turn now to a more detailed explication of the issues. II. Is the Language of Limitation Contained in Supplement Sufficient to Insulate GE from PP&L’s Claims for Cost of Replacement Power and Lost Profits, and from Claims Predicated Upon Breach of Implied Warranty ? As noted in our Preliminary Statement, Supplement 16 was the product of several years of negotiations between representatives of Ebasco and GE. Those negotiations were intended, apparently, to resolve the differences between the Ebasco and GE standard contract terms. The relevant language as finally agreed upon was set forth in Supplement 16, which provided for amendment of the Ebasco Supplementary Terms and Conditions in the following manner: 1) Article 16 of the Supplementary Terms and Conditions was deleted and replaced with the following language: The Seller warrants to the Purchaser and the Owner that the Equipment to be delivered hereunder will be free from defects in material, workmanship and title and will meet the specifications contained in the contract. The foregoing warranty is exclusive and in lieu of all other warranties whether written, oral or implied, including any warranty of merchantability or fitness for purpose. This warranty for each item of Equipment shall be for one (1) year after the initial date of synchronization of the units into the system. The conditions of any tests shall be mutually agreed upon, and the Seller shall be notified of, and may be represented at all tests that may be made. If the Equipment delivered hereunder does not meet the warranty specified above, assuming normal and proper use and maintenance, the Purchaser or the owner shall notify the Seller and make the Equipment available promptly for correction. The Seller shall thereupon correct any defect, including non-conformance with the specifications, at its expense, either, at its option, by repairing or replacing any defective or damaged parts of the Equipment. The liability of the Seller to the Purchaser or the Owner under this warranty (except as to title) or for any loss or damage to the equipment whether the claim is based on contract or negligence shall not in any case exceed the cost of correcting defective or damaged parts as herein provided, and upon the expiration of said one year all such liability shall terminate. The foregoing shall constitute the exclusive remedy of the Purchaser and the sole liability of the Seller, (emphasis added). 2) A new paragraph entitled “Limitation of Liability” was added to the contract reading: Except as provided in the patent indemnity provision the Seller’s liability on any claim of any kind, including negligence, for any loss or damage arising out of, connected with, or resulting from this contract, or from the performance or breach thereof, or from the manufacture, sale, delivery, resale, installation or technical direction of installation, startup or inspection repair operation or use of any equipment covered by or furnished under this contract shall in no case exceed the contract price of the turbine-generator unit or boiler feed pump turbine which gives rise to the claim and shall terminate six (6) years after the initial date of synchronization of the unit into the system. In no event, whether as a result of breach of contract, alleged negligence, or otherwise, shall the Seller be liable for damages for loss of profits or revenue resulting therefrom, or for damages for loss of use of power system, cost of capital, cost of purchased or replacement power, or claims of customers of Purchaser for severe interruptions resulting therefrom, or similar items of damage resulting therefrom, (emphasis added). Regardless of whether replacement power be termed a general or special damage , U.C.C. § 2-719(1) (a) and (3) are quite clear in permitting GE to limit its liability in this manner.’ PP&L argues that the language of Supplement 16 is not specific enough to absolve GE from liability for its own negligence. In particular, PP&L relies on those cases holding that though parties are permitted to contractually abrogate liability for negligent conduct, it must be done in clear and unequivocal language. We agree with PP&L that the law requires such exculpatory clauses to be precisely worded. But we find it difficult to imagine a clause much clearer than the one involved here: “in no event, . • . . as a result of . alleged negligence . . . shall the Seller be liable for damages for loss of profits . . . [or] cost of purchased or replacement power . . .” We thus think it plain that the language of the Limitation of Liability clause precludes any recovery for cost of replacement power or lost profits. The case principally relied upon by PP&L, Willard Van Dyke Prod., Inc. v. Eastman Kodak Co., 12 N.Y.2d 301, 239 N.Y.S.2d 337, 189 N.E.2d 693 (1963), is readily distinguishable. In Willard the clause relied upon by defendant to insulate it from liability made no mention of the word “negligence” at all. A clause not even using the word “negligence” cannot be equated with the language used here. Despite the clear language of Supplement 16, PP&L advances a number of further arguments that the limitation of liability clause does not preclude liability for cost of replacement power or breach of implied warranty. PP&L’s first additional argument springs from two venerable canons of contractual interpretation. We quarrel with neither canon and state them as follows: a) Any ambiguity in the terms of an agreement should be construed against the party which drafted the language. Rentways, Inc. v. O’Neill Milk & Cream Co., 308 N.Y. 342, 126 N.E.2d 271 (1955); and b) Where a party seeks to avoid liability for damages otherwise attributable to him, the contractual language implementing such purpose must be clear and precise. Willard Van Dyke Productions, Inc. v. Eastman Kodak Co., 12 N.Y.2d 301, 239 N.Y.S.2d 337, 189 N.E.2d 693 (1963). From this starting point, PP&L attacks the “limitation of liability” clause and, more particularly, the last sentence thereof wherein GE has sought to exclude all possible claims for cost of replacement power. As noted earlier, that sentence provides: In no event, whether as a result of breach of contract, alleged negligence, or otherwise, shall the Seller be liable for damages for loss of profits or revenue resulting therefrom, or for damages for loss of use of power system, cost of capital, cost of purchased or replacement power, or claims of customers of Purchaser for severe interruptions resulting therefrom, or similar items of damage resulting therefrom. PP&L correctly observes that the term “purchaser” as used in the above provision is defined in Article 1 of the Supplementary Terms and Conditions and refers solely to Ebasco. Article 1 also provides that the term “owner” shall be used in the agreement if reference to PP&L is intended. Accordingly, PP&L contends, because the “limitation of liability” clause refers to “purchaser” and not to “owner”, it is intended to limit the remedies of Ebasco and not PP&L. Alternatively, PP&L would seek our declaration that at the very least, this confusion of antecedents renders the clause ambiguous and thus requires us to construe it against the party seeking to limit liability, herein GE. We find these arguments unpersuasive ; indeed, we find the relevant terms remarkably unambiguous. When reduced to essentials they provide that “in no event . . . shall the Seller be liable for damages for . . . cost of purchased or replacement power . . .” As GE correctly argues, the clause precludes all claims for cost of replacement power regardless of the identity of the claimant. The use of “purchaser” in the provision is restricted to the clause relating to claims of customers for severe service interruptions, an item of damages unrelated to this litigation. PP&L makes a related argument along the following lines: 1) the “guarantee” provision of Supplement 16, in which GE grants several limited warranties and abjures all others, provides that the foregoing “shall constitute the exclusive remedy of the Purchaser and the sole liability of the Seller”; 2) the Supplemental Terms and Conditions define “Purchaser” to mean Ebasco and “Seller” to mean GE; 3) limitations of liability must be clearly expressed and any ambiguity must be construed against the party seeking to avoid liability; and therefore, 4) the exclusion of implied warranties provided for in the “guarantee” provisions of Supplement 16 is not binding upon PP&L. We reject this argument. As GE has correctly noted, paragraph 18 of the Supplementary Terms and Conditions provides that “all warranties and guarantees to the Purchaser shall inure to and be for the benefit of the Owner with the same force and effect as if the Owner had been a party hereto.” We think that this provision effectively disposes of PP&L’s contention in this regard. Moreover, the “limitation of liability” provision of Supplement 16 effectively precludes any claim by PP&L for cost of replacement power even were such a claim predicated upon breach of implied warranty grounds. . PP&L also contends that the language of Supplement 16 does not insulate GE because the language is inconsistent with the terms of the original purchase order. Article 1 of the Supplementary Terms and Conditions to the December 1967 contract documents provides that where the Supplementary Terms and Conditions conflict with the purchase order, the latter shall prevail; hence, PP&L would hold GE to the “guarantees” contained in that document. However, we think this argument no more than a restatement of the contention that Ebasco was unauthorized to amend the terms of the original purchase order and negotiate supplementary terms; this contenten will toe discussed separately, infra. Certainly, if Ebasco was so authorized, paragraph 2 of the Supplementary Terms and Conditions indicates that the proper means of amending the purchase order was by the use of a Supplement. A further PP&L argument springs from a provision contained in Supplement 16 which amended the portions of the purchase order captioned “Superintendence of Erection” by substituting therefor new language entitled “Technical Direction of Installation” (T.D.I.). The final paragraph of the T.D.I. clause provides: The Seller agrees to indemnify and hold Purchaser and Owner harmless from and against all loss, damage and expense occasioned by any negligent act or negligent omission of any failure (sic) of its Field Representative to exercise due care in the performance of any of the obligations specified herein to be performed by the Seller. The foregoing indemnity shall not apply to any loss or injury to persons or property caused (a) by negligent acts or negligent omissions of the Purchaser, its employees, agents or sub-contractors, (b) by failure of the Purchaser, its employees, agents or subcontractors to exercise due care in following the Field Representative’s instructions, or (c)' by failure or malfunctioning of any tools, equipment facilities or devices furnished by the Purchaser, it employees, agents or subcontractors. We find unpersuasive PP&L’s contention that the indemnification contained in the T.D.I. clause by which GE accepted liability for all “loss, damage and expense” resulting from negligent performance of those duties is sufficient to impose upon GE liability for cost ’ of replacement power. PP&L contends that because the T.D.I. amends a portion of the original purchase order, it becomes part and parcel of the original purchase order, and therefore prevails, pursuant to Article I of the Supplementary Terms and Conditions over any other term, in the Supplementary Terms and Conditions. The difficulty with accepting such an argument is that to do so would emasculate the entire limitation of liability paragraph. Clearly, that clause was inserted by the parties, to preclude liability on the part of GE for the cost of replacement power regardless of the source of such a claim. To now hold that clause “conflicts” with the T.D.I. would negate the very existence of the limitation of liability provision because the latter clause is — by definition — in “conflict” with any other contract clause prescribing a measure of liability. We decline to so hold. PP&L’s next argument stems from Paragraph 17 of the Ebasco Supplementary Terms and Conditions which provides: 17. DELAY The Seller shall be held responsible for any damages of a general nature which the Purchaser and/or the Owner may incur due to any delay in delivery or in the completion of the work hereunder as a result of causes within the Seller’s reasonable control and shall be held responsible only for such special damages as are specifically and clearly referred to in the Order. In the event of any delay due to causes beyond the Seller’s reasonable control, such as acts of God, acts of the Purchaser and/or the Owner, acts of civil or military authority, priorities, fires, strikes, floods, epidemics, quarantine restrictions, war, riot, delays in transportation, car shortages, and inability due to causes beyond its reasonable control to obtain necessary labor, materials, or manufacturing facilities, the date of delivery shall be extended for a period equal to the time lost by reason of the delay. The argument proceeds from the notion that because Supplement 16 did not expressly amend Paragraph 17 of the Supplementary Terms and Conditions, GE accepted the terms of Paragraph 17 and agreed to be responsible for general damages caused by any delay in performance of its contractual obligations. Because general damages include all damages reasonably foreseeable at the time of contracting, and because the record allegedly establishes that all parties foresaw the cost of replacement power as an item of damage, PP&L asserts that the presence of the delay provision requires us to deny GE’s motion for summary judgment. We disagree. Again we are faced with the clear and unambiguous language of the limitation of liability provision of Supplement 16 which provides that “[i]n no event, whether as a result of breach of contract, alleged negligence, or otherwise, shall the Seller be liable for . cost of purchased or replacement power .” It seems clear to us that delay is no more than a species of breach of contract as that phrase is used in the limitation of liability clause. At the very least, delay is an “otherwise”. Just as with the language in the T.D.I., discussed supra, to hold otherwise would be to negate the entire thrust of the limitation of liability clause. Lastly, PP&L contends that, because GE supplied other components for the Brunner Island project under four separate contracts containing dissimilar remedy and warranty provisions, we should hesitate to grant summary judgment on the GE motion presently before us. We reject this approach. GE is not now seeking to avoid liability on any of the other contracts pursuant to which it provided equipment at Brunner Island. On the other hand, the question whether GE may be held liable for the cost of replacement power purchased because of defects in any of the equipment provided by it under Purchase Order NY-668001, is squarely before us. We do not think that possible liability on wholly separate contracts is a reason to deny summary judgment on this one. In sum, we believe that the language of Supplement 16, if properly a part of the contract, is sufficient to preclude recovery by PP&L from GE of cost of replacement power and of damages flowing from any breach of implied warranty under any theory bottomed upon the contract between the parties. However, our inquiry is in this regard not concluded, for we must still determine whether genuine issues of material fact exist on the question of whether Supplement 16 is properly a part of the contract in question. We discuss this matter in the ensuing section of this opinion. III. Is There a Genuine Issue of Material Fact on the Question Whether PP&L Obtained Contractual Rights Pursuant to § 2-207 of the Uniform Commercial Code, by Virtue of the GE Quotation of July 15,1964, the PP&L Purchase Order of July 21, 1964 and the Events Occurring Thereafter but Prior to December 7, 1967, the Date Upon Which Supplement 16 was Executed; if PP&L Obtained Contractual Rights Pursuant to § 2-207, did Ebasco Have Authority to Impair These Rights? Is PP&L Bound by Supplement 16? A. Introduction The second major contention that PP&L advances in opposition to GE’s motion for summary judgment revolves around § 2-207 of the Uniform Commercial Code (U.C.C.). That section reads as follows: (1) A definite and seasonable expression of acceptance or written confirmation which is sent within a reasonable time operates as an acceptance even though is states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the. additional or different terms. (2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:, (a) the offer expressly limits acceptance'to the'térms of the offer; (b) they materially alter it; or (c) notification of objection to them has alreády been given or is given within a reasonable time after notice of them is received. (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act. Succinctly stated, PP&L’s threshold contention is that we may not award summary judgment on the “contract” until it is determined just what documents and acts define the contract. PP&L’s interpretation of what constitutes the contract may best be summarized by quoting the relevant portion of its brief: PP&L contends that a legally enforceable agreement containing the Ebasco Supplementary Terms and Conditions existed before December 7, 1967. On July 15, 1964, GE issued a quotation for a turbine generator subject to the GE Handbook terms and conditions. Ebasco accepted the GE price by letter dated July 21, 1964 and stated that “[a] formal contract will be issued at a later date containing the terms and conditions of, and in the format of, the usual type of contract issued by Ebasco.” Although GE internal documents indicate that GE recognized that the Ebasco terms and conditions were different than the terms and conditions of the GE Handbook, GE never communicated its rejection of the Ebasco terms in connection with the turbine generator agreement until years later, May 4, 1967. That Ebasco had assumed that the usual form of Ebasco contract would govern the turbine generator agreement is clear from Ebasco’s very strong response on May 25, 1967. Ebasco’s position was supported not only by GE’s silence on the subject but also by the fact that GE had accepted the Ebasco terms in four other contracts executed in connection with Brunner No. 3 as well as in contracts for other projects. PP&L contends then, that in determining what contractual provisions apply to the current dispute, we should look not to Supplement 16, but rather to the contract allegedly formed in 1964 between the parties by operation of law pursuant to U.C.C. § 2-207. But the argument does not stop here, for if it did, it would not prove enough. Linked to the foregoing is the contention that because a contract was formed pursuant to § 2-207 at the time of the quotation-purchase order exchange, and because that contract, according to § 2-207, contained warranties and remedies superior to those provided in Supplement 16, Ebasco was, as agent for PP&L, duty bound to advance its interests and without power to impair them by entering into Supplement 16 on behalf of PP&L. The “bottom line” to this argument is that Supplement 16 never became binding on PP&L and that the limitation of liability and disclaimers of implied warranty clauses contained therein do not govern this transaction. However, as noted, we must first determine whether there is a genuine issue of material fact on the question of whether PP&L obtained contract rights pursuant to § 2-207. GE contends that there is no such genuine issue of fact and that we must declare as a matter of law that no § 2-207 contract was formed. Perhaps the strongest formulation of the position that PP&L did in fact obtain contract rights pursuant to § 2-207 was made by Mr. Conrad, counsel for PP&L, at hearing on this motion: I ask Your Honor fairly if Salerno, [A. J. Salerno, Ebasco Purchasing Agent], had said the heck with GE, the heck with the consequences, we are not going to sign Supplement 16, would any Court not require GE to deliver that turbine generator? Couldn't Ebasco get damages under these circumstances, particularly where GE has already made deliveries? The two boiler feed-pump turbines were delivered before Supplement 16 was ever negotiated or signed and after Salerno protested that Ebasco’s terms and conditions governed. Now, what could be solider than that, Your Honor, under the Uniform Commercial Code? Transcript of Oral Argument 79-80. Though the question is not before us, PP&L makes an enormously powerful argument that GE would not have been allowed to back out of the deal at that late point in time. But, unfortunately, even a conclusion that PP&L is correct on that point would not resolve the matter. For as Professors White and Summers put it: Unfortunately [2-207] is in one respect like the amphibious tank that was originally designed to fight in the swamps, but was ultimately sent to fight in the desert. The original draftsman of 2-207 designed it to keep the welsher in the contract . . [It] was initially designed primarily to change the result in [cases in which the courts had allowed welshers to escape their contractual ties because of the lack of a so-called mirror image acceptance on the part of the offeree]. It rejects the common law mirror image rule and converts the common law counteroffer into an acceptance under 2-207(1). But unfortunately the courts have had to press 2-207 into service not just to hold the welsher in. Parties to sales deals much more often call on courts to use 2-207 to decide the terms of their contract after they exchange documents, perform, or start to perform and then fall into dispute. This is not only a different but also a more difficult problem for the law than that of keeping the welsher in. The law as to terms must be sophisticated enough to nullify the efforts of fine-print lawyers, it must be sufficiently reliance-oriented to protect the legitimate expectations of the parties, and it must be fair and even handed. It must not give one side the whole loaf, especially on nonnegotiated matters. J. White & R. Summers, Uniform Commercial Code §§ 1-2, at 24-25 (1972). As will be seen, we cannot conclude as a matter of law, that a § 2-207 contract existed, or that one did not. We will outline some of the issues of material fact which we believe exist and which preclude our determining upon a motion for summary judgment the questions of whether a § 2-207 contract ever existed and, if so, the terms thereof. We begin by noting that § 2-207 provides for two quite different means for creation of a contract. The first is by the writings of the parties pursuant to § 2-207(1) and (2). Additionally, where the writings of the parties do not otherwise create one, § 2-207(3) provides for creation of a contract by conduct. Subsections 2-207(1) and (2) are, perhaps, less than adequately drafted. As a result, the cases construing them have not always been in accord. One of the earliest cases and perhaps the most celebrated to deal with § 2-207 is Roto-Lith, Ltd. v. F. P. Bartlett & Co., 297 F.2d 497 (1st Cir. 1962), a suit by plaintiff for breach of an implied warranty of fitness. The plaintiff had ordered from defendant an emulsion for use' in the plaintiff’s manufacturing process by means of a purchase order stating, inter alia, “End use: wet pack spinach bags”. It was from this language that plaintiff argued that defendant was aware of the particular purpose for which he needed the emulsion. The sale was consummated, however, by defendant’s acknowledgement containing provisions expressly excluding any guarantees or warranties and stating that “[i]f these terms are not acceptable Buyer must notify Seller at once”. Plaintiff did not contest the terms, paid for the emulsion, used it, and found it defective. Plaintiff’s initial contention, with which the First Circuit agreed, was that defendant’s condition that there be no warranties constituted a proposal which “materially altered” the agreement. Plaintiff further contended that the acknowledgement effected a completed agreement without the disclaimer because as a further proposal which materially altered the original offer, the disclaimer could not become part of the agreement unless plaintiff expressed assent thereto. This latter contention was rejected by the Court. Judge Aldrich, speaking for the Court, wrote: We agree that Section 2-207 changed the existing law, but not to this extent. Its purpose was to modify the strict principle that a response not precisely in accordance with the offer was a rejection and a counteroffer. . Now, within stated limits, a response that does not in all respects correspond with the offer constitutes an acceptance of the offer, and a counteroffer only as to the differences. If plaintiff’s contention is correct that a reply to an offer stating additional conditions unilaterally burdensome upon the offeror is a binding acceptance of the original offer plus simply a proposal for the additional conditions, the statute would lead to an absurdity. Obviously no offeror will subsequently assent to such conditions. Perhaps it would be wiser in all cases for an offeree to say in so many words, “I will not accept your offer until you assent to the following : * * * ” But businessmen cannot be expected to act by rubric. It would be unrealistic to suppose that when an offeree replies setting out conditions that would be burdensome only to the offeror he intended to make an unconditional acceptance of the original offer, leaving it simply to the offeror’s good nature whether he would assume the additional restrictions. To give the statute a practical construction we must hold that a response which states a condition materially altering the obligation solely to the disadvantage of the offeror is an “acceptance * * * expressly * * * conditional on assent to the additional * * * terms.” 297 F.2d at 500 (citations omitted). The Roto-Lith Court thus implied a condition of acceptance, instead of hewing strictly to the requirement of § 2-207(1) that conditional acceptance must be expressed in words. Although there is much to be said for the Roto-Lith approach, the case has not been treated kindly by the cases or commentators. Instead, most courts have adopted a construction of § 2-207(1) typified by that of the Sixth Circuit and outlined in Dorton v. Collins & Aikman Corp., 453 F.2d 1161 (6th Cir. 1972). In Dorton, a carpet retailer sued its supplier alleging that carpet purchased from the supplier was not woven from the agreed upon fiber. Defendant sought a stay of the Federal Court action pending compulsory arbitration, which it claimed was mandated by language included in its acknowledgement of sale form. That acknowledgement was sent upon receipt of an oral order from plaintiff and included the following language: [t]he acceptance of your order is subject to all of the terms and conditions on the face and reverse side hereof, including arbitration .... 453 F.2d at 1164. Assuming that the addition of a clause requiring arbitration would have effected a material change in the offer, (actually the Sixth Circuit remanded to the District Court for a finding on this question), the Dorton Court held that despite the conditional language contained in the acknowledgement, that language was not sufficient to make the acceptance “conditional upon assent to the different terms”: Viewing the Subsection (1) proviso within the context of the rest of that Subsection and within the policies of Section 2-207 itself, we believe that it was intended to apply only to an acceptance which clearly reveals that the offeree is unwilling to proceed with the transaction unless he is assured of the offeror’s assent to the additional or different terms therein. 453 F.2d 1161, 1168 (6th Cir. 1972). In contrast to the Roto-Lith approach, where the notion of acceptance expressly conditional on assent to additional terms is implied, the Dorton approach is to recognize a contract unless the would-be acceptance specifically makes its operation conditional on the offeror’s assent to its terms. Concluded the Court: To recognize Collins & Aikman’s acceptances as “expressly conditional on [the buyer’s] assent to the additional . terms” therein, within the proviso of Subsection 2-207(1), would thus require us to ignore the specific language of that provision. Such an interpretation is not justified in view of the fact that Subsection 2-207(1) is clearly designed to give legal recognition to many contracts where the variance between the offer and acceptance would have precluded such recognition at common law. Id. (footnote omitted). Despite a certain appeal of Roto-Lith, we believe that the Dorton decision reflects the better approach (as well as the weight of authority) , That conclusion is relevant here because the Roto-Lith approach would bar the formation of a § 2-207(1) contraet if material differences exist in the GE quotation and Ebasco reply, whereas the Dorton approach leaves open the possibility that a contract was created pursuant to § 2-207(1) if certain factual issues were to be resolved by a fact finder in favor of PP&L. As noted previously, § 2-207(3) provides an additional ground for creation of a contract where “the writings of the parties do not otherwise establish [one]”. Thus, where the conduct of the parties is consistent with the existence of a contract, a contract may be formed with terms consisting of those agreed upon in any of the writings of the parties, together with other terms provided in the Code. This subsection is also relevant here and will be discussed more fully below. Having outlined the provisions of § 2-207 and the gloss accorded it by way of judicial interpretation, we turn now to our reasons for concluding that there are genuine material issues of fact pertaining to all three subsections of § 2-207 which foreclose our establishing on a motion for summary judgment whether a § 2-207 contract ever existed. B. Issues of Fact Under § 2-2-07(1) The determination of whether and when a contract first came into existence between GE and Ebasco (acting as agent for PP&L) is sufficiently factually complex to preclude a determination in a summary judgment proceeding of issues arising under § 2-207(1). On July 15, 1964, by means of a letter from T. J. Barron of the GE Electric Sales Department, GE quoted to Ebasco a price for the steam turbine generator involved in this case. Significantly, the letter commenced with this language: “Confirming Mr. George Cox’s conversation of today, we are pleased to quote as follows. . . . ” On July 21, 1964, Ebasco replied by means of a letter from A. J. Salerno, Ebasco’s purchasing agent, which letter began “This will confirm the verbal commitment of our Mr. C. C. Bonin to your Mr. George Cox on July 15, 1964, for One (1) Turbine Generator Unit described as follows. . . . ” These letters reflect that previous discussion concerning the turbine generator had resulted in an understanding between the parties which was communicated by telephone on July 15. If the understanding was in the nature of an informal agreement between the parties as to the terms of the purchase contract, then Official Comment 1 to U.C.C. § 2-207 would indicate that the section is applicable to these facts: This section is intended to deal with two typical situations. The one is the written confirmation, where an agreement has been reached either orally or by informal correspondence between the parties and is followed by one or both of the parties sending formal [acknowledgements or] memoranda embodying the terms so far as agreed upon and adding terms not discussed. In such a situation, it would be necessary for the fact finder to determine what terms were agreed upon in the informal agreement and then apply § 2-207(2) to construct the remaining provisions of the contract. Obviously the terms of any oral agreement that did exist are not subject to resolution on a motion for summary judgment upon the record before us. There is a second set of possibilities. A fact finder could conclude: (1) that the Ebasco reply letter of July 21, notwithstanding its reference to Ebasco’s terms and conditions constituted a “definite and seasonable expression of acceptance” of GE’s purchase order; and (2) that the Ebasco reply letter was not expressly made conditional on assent to the additional terms, thus bringing the letters within the ambit of and creating a contract under § 2-207(1). On the other hand, we think a fact finder could also find that although the Ebasco reply letter was not expressly made conditional upon assent to the additional terms, nevertheless, the reply could not reasonably be construed as a “definite and seasonable expression of acceptance.” In other words, although the language contained in the Ebasco reply of July 21 to the effect that the sale would be transacted pursuant to the Ebasco terms and conditions is not necessarily sufficient under § 2-207(1), as construed in Dorton, to create an “acceptance ... expressly made conditional on assent to the additional . . . terms” (see n. 25, supra), we believe that the existence of the language also creates a question for the fact finder as to whether the letter could reasonably have been construed as a “definite and seasonable expression of acceptance.” As the Court noted in Construction Aggregates Corp. v. Hewitt-Robins, Inc., 404 F.2d 505, 509 (7th Cir. 1968): The resolution of [the] question “turns upon the proper conclusions to be drawn from a series of letters, particularly of a commercial character, taken in connection with other facts and circumstances,” so that it [is] properly referable to [the fact finder]. Rankin v. Fidelity Insurance Trust & Safe Deposit Co., 189 U.S. 242, 252-53, 23 S.Ct. 553, 47 L.Ed. 792 If the fact finder concluded that the letter should not have been so construed, no contract would be formed pursuant to § 2-207(1) and what contract, if any, existed would be determined by reference to the common law and § 2-207(3). Thus, we cannot say as a matter of law that a contract was or was not created under § 2-207(1). That determination must await the decision of the fact finder on those matters presently left open in this record. C. Issues of Fact Under § 2-207(2) Since it is possible that § 2-207 (1) would be found applicable to the correspondence between GE and Ebasco, it is appropriate to consider whether genuine issues of material fact exist relating to the application of § 2-207(2) in constructing the terms of the contract. That subsection deals with the effect to be accorded terms contained in the acceptance which are in addition to those terms contained in the offer or, perhaps, different therefrom, where a contract has been formed pursuant to § 2-207(1). We will content ourselves here with indicating those areas in which we think genuine issues of material fact still exist. There is no dispute that on July 15, 1964, by means of a letter from T, J. Barron of the GE Electric Sales Department, GE quoted to Ebasco a price for the steam turbine generator involved in this case. The letter set forth various pricing data, and a provision providing Ebasco with an option to cancel within 90 days. It then continued: The above prices are based on our Standard Conditions of Sale, Price Policy, and Price Data as shown in GE Handbook Section 4710, dated May 25, 1964. Also undisputed, is the reply letter from A. J. Salerno, the Ebasco purchasing agent, dated July 21, 1964, which, after restating the turbine specifications, concluded : A formal contract will be issued at a later date containing the terms and conditions of, and in the format of, the usual type of contract issued by Ebasco. However, the facts in the' ensuing phases of the parties’ dealings are not undisputed, and it would be for a fact finder to determine, pursuant to § 2-207(2) what terms were included in the contract allegedly created'by the exchange of letters in July of 1964. For instance, § 2-207(2) provides that additional terms become a part of the contract unless inter alia “notification of objection to them has already been given or is given within a reasonable time after notice of them is received.” A genuine material issue of fact exists as to whether and/or when GE gave notice to Ebasco of GE’s objection to the terms of the Ebasco standard agreement. The record currently reflects at least three different occasions upon which a fact finder could find that Ebasco had been notified of GE’s objections. The first such occasion might well be upon receipt by Ebasco of the July 14, 1964, letter and quotation. At that point Ebasco was aware of the fact that the terms upon which GE proposed to conduct the sale differed from the standard Ebasco requirements. In effect, a fact finder might find that the quotation itself was sufficient, when compared to the proposed terms of acceptance, to place Ebasco on notice that the terms that it proposed were objectionable. A second instance at which Ebasco might be found by the jury to have been notified of GE’s objections, would be upon receipt by Ebasco of a September 24, 1965, letter written by J. A. Urquhart of the GE large steam generator marketing division, suggesting the setting up of appointments to “pursue further the subject of contract conditions. ...” and suggesting that “any meeting with EBASCO (sic) should now include not only their purchasing people but, more importantly, their lawyers.” In light of § 2-207 (2)’s requirement that notice be given within a “reasonable” time, and in light of the fact that the manufacturing of the unit had commenced only five months before and was to continue for almost two more years, it is possible that notification would still have been reasonably given at this date. Still a third instance, at which a fact finder might find notice to Ebasco had been effectuated would be on May 4, 1967, when Salerno received from GE a detailed proposal for compromise contract terms. Nor do we mean to indicate that these are the only three dates upon which a fact finder might find notification of GE’s objections had occurred; rather we merely note these three dates as examples of occasions upon which a fact finder might find that notification had taken place. Until such factual issues were resolved, the applicability of § 2-207(2) (c) could not be determined. Similarly, there exist material issues of fact on the question whether the language of the Ebasco standard terms and conditions materially altered the proposed terms in the General Electric handbook. We are aware of the fact that the language of the two documents in regard to warranties differs. And, as might be expected, several other provisions in the two forms are seemingly in conflict. But we cannot say solely upon reading the bare words of the proposed contracts which changes, if any, are material. We think that this is a determination that could only be made upon a review of all the facts and the circumstances surrounding this multimillion dollar transaction. To make a determination of materiality without resort to the factual context surrounding the deal would fly in the face of the case law and indeed, the official commentary to § 2-207. In the latter regard, we set forth the opening phrase of Note 4 of the Official Commentary to § -2-207: Examples of typical clauses which would normally “materially alter” the contract and so result in surprise or hardship if incorporated without express awareness by the other party . . (emphasis added). That comment indicates to us that the materiality of a change is to be judged in large part by the expectations of - the parties involved in the transaction. That is a determination uniquely within the province of a fact finder and one we are incapable of making on a motion for summary judgment. So then, for all the foregoing reasons, we believe that genuine material issues of fact not only preclude our deciding as a matter of law that a contract came into existence by the exchange of letters and forms in July, 1964 but also our determining what were its terms. By the same token, sufficient issues of facts exist to prevent us from deciding as a matter of law that no § 2-207(1) contract came into existence either. D. Issues of Fact Under § 2-207(3) Section 2-207(3) of the Code provides: Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act. Assuming, arguendo, that the writings of the parties did not produce a binding contract, PP&L’s § 2-207 contentions require us to determine whether genuine material issues of fact exist on the question of whether the conduct of the parties recognized the existence of a contract. We think such issues do exist. On the one hand, the manfacturing of the turbines apparently began as early as March of 1965, and was well underway, if not near completion when Supplement 16 was executed. As we noted earlier, had GE refused delivery, there would have been a powerful § 2-207(1) or § 2-207(3) argument. On the other hand, the writings of the parties from the time of the original quotation and purchase order in 1964 until agreement upon Supplement 16 in 1967 are replete with references to the lack of a contract between the parties Whether the conduct of the parties recogized the existence of a contract is a factual determination which, in light of the conflicting evidence in the record before us, should properly be left to a fact finder. E. Ebaseo’s Authority to Bind PP&L to Supplement 16 As previously noted, PP&L contends that once a contract was formed pursuant to either § 2-207(1) or (3), Ebaseo was stripped of its power to negotiate with GE any further provisions that were to the detriment of PP&L. Two theories are advanced by PP&L in support of this conclusion.. First, PP&L contends that having become the third party beneficiary of the § 2-207 contract allegedly formed in 1964 between Ebaseo and GE it gained certain contract rights which neither Ebaseo nor GE could thereafter affect. Alternatively, PP&L argues that Ebaseo — though concededly the agent of PP&L — had no authority to give up terms favorable to PP&L once they were obtained. Those favorable terms are asserted to be those gained by PP&L pursuant to operation of § 2-207 on the exchange of letters in July, 1964. We believe the third party beneficiary argument to be lacking in merit. We believe, however, that genuine material issues of fact do exist that bar our determining on a motion for summary judgment whether Ebaseo possessed either actual, implied apparent or inherent authority to bind PP&L to the terms of Supplement 16. 1. Third-party Beneficiary Status. It is conceded by PP&L that Ebaseo was operating as the agent of PP&L at all times here in question. That being the case we cannot see any possible basis for the claim that PP&L could be vested with third party beneficiary rights flowing from the contract allegedly created by operation of § 2-207. Quite simply: Where the promisee is actually the duly appointed and authorized agent of the person who is to receive the contracted performance, no third party beneficiary situation exists. The parties to the contract are the promisor on the one side and the principal on the other. L. Simpson, Contract § 117, at 248 (1965). Because PP&L was in fact a principal in any contract negotiated between Ebaseo and GE, by definition PP&L could not also be a third-party beneficiary of that same contract. 2. Ebasco’s Power as Agent of PP&L a. The Applicable Agency Law. We have concluded in Part II of this opinion that the provisions of Supplement 16, if they are binding upon PP&L, are sufficient to absolve GE from liability for cost of replacement power. Because we have determined that PP&L was never a third party beneficiary of the Ebasco-GE agreement, the authority of Ebasco to bind PP&L must be determined by reference to the law of agency. The Agent’s power to bind his principal may stem from four different sources. The first, express authority, is directly granted to the agent by the principal either verbally or in writing. In this action, express authority flows from the PP&L-Ebaseo contract, and from any further communications between those two corporations which may be established by the evidence. A second potential source of Ebasco’s authority is “implied authority”. Section 35 of the Restatement (Second) of Agency provides : Unless otherwise agreed, authority to conduct a transaction includes authority to do acts which are incidental to it, usually accompany it, or are reasonably necessary to accomplish it. Questions of express and implied authority are determined by reference to the communications between the principal and his agent. Apparent authority, the third potential source of Ebasco’s power to bind PP&L, is the power an agent gains to bind his principal to a contract with a third party, not as the result of communications between principal and agent, but rather because of manifestations made by the principal to the third party. Here, if GE can show representations made to it by PP&L that lead GE to believe that Ebasco was authorized to negotiate Supplement 16, the possibility of apparent authority would arise. Lastly, § 8A of the Restatement (Second) of Agency defines the Inherent Agency Power: Inherent agency power is a term used in the restatement of this subject to indicate the power of an agent which is derived not from authority, apparent authority or estoppel, but solely from the agency relation and exists for the protection of persons harmed by or dealing with a servant or other agent. (emphasis added). Section 161 of the same Restatement is a corollary of § 8A, setting forth a specific application of the general § 8A principle: A general agent for a disclosed or partially disclosed principal subjects his principal to liability for acts done on his account which usually accompany or are incidental to transactions which the agent is authorized to conduct if, although they are forbidden by the principal, the other party reasonably believes that the agent is authorized to do them and has no notice that he is not so authorized, (emphasis added) Where a third party and a principal are held bound to a contract by an agent’s apparent or inherent authority, recovery by a principal against his agent for damages occasioned by the agent’s breach .of his actual or implied authority is not foreclosed. With these principles in mind we approach the question of Ebasco’s authority to negotiate Supplement 16. b. The Factual Background The contract executed by PP&L and Ebasco contains the following grant of express authority relevant to this litigation: II. A. Ebasco shall, at its own cost and expense, design engineer, construct and install the Project, and for this purpose shall furnish any and all design and engineering services and supervision, all facilities, equipment and material, and all supervision and labor necessary for the completion of the Project, within the time and on the terms and conditions provided for in this agreement. B. The Permanent Project Equipment described in Appendix D shall be provided by Ebasco with its own funds from among the list of bidders set forth in Appendix E. For this purpose Ebasco shall, in a good, substantial and Work