## Facts

- Bosch Automotive Motor Systems Corp. (Bosch) contracted with Duffy Tool & Stamping, Inc. (Duffy) to supply steel mounting plates used in Bosch’s air conditioner motors.
- The supply contract required Duffy to manufacture plates to Bosch’s specifications and was intended to run for a multi-year term (with about two years remaining when the dispute came to a head).
- Disputes arose during performance about plate quality and whether some plates could be used in Bosch’s production process.
- Duffy experienced economic pressure as steel costs increased and notified Bosch that it would stop supplying plates after six weeks despite the remaining contract term.
- Bosch maintained Duffy was its sole source for the plates and that an abrupt stop threatened Bosch’s ability to continue supplying Ford Motor Company.
- At a meeting, Duffy said it would keep supplying plates for only a limited time if Bosch accepted new terms, including a 10% price increase and a $3,000 tooling setup charge.
- Duffy followed up with a letter proposing a six-month “winding down” period, higher part prices, and a term that Duffy be held harmless for all claims relating to the contract.
- Duffy contended Bosch’s president later stated in a phone call that Bosch would not sue Duffy.
- Bosch promptly obtained another supplier.
- Duffy made a last shipment and sent Bosch an invoice for that delivery.
- Bosch told Duffy some of the last shipment was defective and unusable, and the parties did not agree on any price adjustment.
- Bosch did not pay the final invoice; Duffy sued to collect it, and Bosch counterclaimed for breach of the supply contract.
- The trial court found Duffy breached the supply contract but also found Bosch owed Duffy for the final delivery; the court offset the amounts and entered a net judgment for Bosch of $133,542.66.
- Duffy appealed.

## Issues

1. Did Bosch waive its breach-of-contract claim through the president’s alleged statement that Bosch would not sue and through Bosch’s conduct in securing an alternative supplier?
2. Did the parties modify the original supply contract (or substitute a new agreement) so that Duffy’s reduced or ending performance under the proposed wind-down terms could not constitute breach of the original contract?
3. Did the trial court properly award Duffy the amount due for the final shipment and offset that amount against Bosch’s larger breach damages?

## Decision

- The Tennessee Court of Appeals affirmed the trial court’s judgment.
- The court held Bosch did not clearly and intentionally waive its breach-of-contract claim based on the alleged “would not sue” statement or Bosch’s subsequent conduct.
- The court held Duffy did not establish an enforceable modification or substituted agreement that released Duffy from its remaining obligations under the original supply contract.
- The court upheld the trial court’s damages and offset, including recognizing Bosch’s obligation to pay for the final delivery while awarding Bosch a net recovery of $133,542.66 after setoff.

## Legal Principles

- Waiver requires a voluntary, intentional relinquishment of a known right; it must be shown by clear proof and is not established by ambiguous statements or conduct consistent with other explanations.
- Contract modification requires mutual assent to the new terms; a party’s proposal for new terms does not change an existing contract absent acceptance of the material terms.
- A party’s actions to protect its operations after the other side threatens nonperformance—such as obtaining an alternative supplier—can be consistent with mitigation of damages and do not, by themselves, prove waiver of contract remedies.
- In a nonjury case, an appellate court gives deference to the trial court’s factual findings unless the evidence preponderates against them.
- When both sides have monetary claims arising from the same transaction (e.g., unpaid invoice and breach damages), a court may offset the amounts and enter a net judgment.

## Conclusion

The Court of Appeals affirmed a net judgment for Bosch after concluding that Duffy breached the long-term supply contract by attempting to stop performance early, that Bosch neither waived its breach claim nor accepted a binding wind-down modification that excused Duffy’s remaining duties, and that the trial court properly offset the unpaid amount for Duffy’s last shipment against Bosch’s larger breach damages, resulting in a net award of $133,542.66 to Bosch.


Duffy Tool & Stamping, Inc. v. Bosch Automotive Motor Systems Corp., 2000 Tenn. App. LEXIS 63 (2000)