## Facts

- Dynamic Machine Works, Inc. (DMW), a Massachusetts maker of precision components, ordered a CNC lathe from Machine & Electrical Consultants, Inc. (MEC), a Maine machinery distributor, for about \$355,000.
- MEC sourced the lathe from a third-party manufacturer (a Johnford lathe to be built in Taiwan).
- The purchase order set staged payments: a down payment before delivery, a second payment upon delivery, and a final payment when the lathe was fully commissioned/accepted.
- Delivery was originally scheduled for May 2003, but delays (including events beyond MEC’s control) pushed delivery back; DMW agreed to multiple delivery extensions.
- While waiting, DMW rented a similar lathe from MEC and reported operational problems, warning that comparable problems in the new lathe could lead to rejection.
- In summer 2003 communications confirming an agreement between the parties, DMW accepted a revised timeline for installation/commissioning and addressed consequences of further delay.
- After the lathe was delivered and installed, DMW identified multiple defects and operational issues, and the parties continued working toward commissioning.
- On December 9, 2003, DMW signed a writing setting a revised commissioning (cure) date of December 19, 2003.
- On December 10, DMW discovered additional problems.
- On December 11, DMW sent MEC a written rejection of the lathe and demanded return of its payments.
- As of December 11, MEC had not materially changed its position in reliance on the December 9 extension.
- MEC refused to return the payments, and DMW sued in federal court (diversity), asserting UCC and related contract-based claims.

## Issues

1. Under Massachusetts UCC § 2-209, does a buyer have the right to retract a written extension allowing the seller additional time to cure defects in delivered goods when the seller has not relied on the extension?
2. Is a written extension of a commissioning/cure deadline treated as a non-retractable modification under § 2-209(1) or as a retractable waiver under § 2-209(5)?
3. Should a federal court deciding summary judgment in a diversity sales case certify that unsettled Massachusetts UCC question to the Massachusetts Supreme Judicial Court rather than making its own prediction of state law?

## Decision

- The U.S. District Court for the District of Massachusetts held that the parties’ dispute turned on an unsettled question of Massachusetts commercial law concerning UCC § 2-209 and the effect of a buyer’s written cure-date extension.
- Concluding there was no controlling Massachusetts precedent resolving whether such an extension is a modification or a waiver, the court certified the dispositive question to the Massachusetts Supreme Judicial Court.
- The court stayed further merits resolution pending the state high court’s answer, rather than deciding the retraction question on an Erie-based prediction at the summary-judgment stage.

## Legal Principles

- In a federal diversity action, state substantive law governs; when a determinative issue of state law is unsettled, a federal court may certify the question to the state’s highest court.
- Massachusetts UCC § 2-209(1) provides that an agreement modifying a contract for the sale of goods may be binding without consideration.
- Massachusetts UCC § 2-209(5) provides that a party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification that strict performance will be required, unless retraction would be unjust due to a material change of position in reliance on the waiver.
- Whether a written extension of time for commissioning/cure is a modification or a waiver can determine whether the extending party may retract the extension unilaterally and whether a subsequent rejection is timely.

## Conclusion

The district court did not decide whether DMW’s December 9 written extension could be retracted; instead, because the case hinged on an unsettled Massachusetts UCC § 2-209 question (modification versus waiver and retraction absent reliance), it certified the question to the Massachusetts Supreme Judicial Court and paused further merits determinations pending the authoritative state-law answer.


Dynamic Machine Works, Inc. v. Machine & Electrical Consultants, Inc., 352 F. Supp. 2d 83 (2005)