## Facts

- A glue manufacturer operated a factory using steam power and contracted in writing with a boiler manufacturer to furnish and install a new steam boiler.
- The contract required the new boiler to have “fifty per cent greater capacity” than the factory’s existing boiler.
- The manufacturer delivered and installed a boiler at the factory.
- After installation and testing, the boiler did not achieve the promised capacity; evidence indicated it had materially less capacity than the old boiler.
- The buyer attempted to operate the factory using the new boiler together with the old boiler, but the combined output still did not meet the factory’s steam needs.
- The buyer refused to pay the contract price, asserting the delivered boiler did not conform to the contract’s capacity requirement.
- Evidence indicated the buyer requested that the manufacturer remove the boiler from the premises.
- The seller claimed it had substantially performed and that the buyer’s retention and use constituted acceptance.

## Issues

1. Whether delivering a boiler that materially fails an express capacity term can constitute substantial performance permitting recovery of the contract price subject to an offset.
2. Whether the buyer’s retention and attempted use of the nonconforming boiler amounted to acceptance that barred rejection and required payment of the contract price (less damages).

## Decision

- The Wisconsin Supreme Court reversed the judgment for the seller and remanded.
- The court held the seller had not substantially performed because the capacity deficiency was material and defeated an essential purpose of the contract.
- The court rejected awarding the contract price based on substantial performance with a deduction for defects where the promised result was not attained.
- The court concluded the buyer’s attempted use did not, on these facts, constitute an acceptance that waived the right to refuse payment for nonconforming performance.

## Legal Principles

- Substantial performance does not permit recovery of the contract price where a deviation from an express, performance-defining specification is material and frustrates the contract’s main purpose.
- An express specification (such as a stated capacity) may operate as a condition of the buyer’s duty to pay; failure to meet it prevents enforcement of the contract price.
- A buyer’s efforts to test or attempt to make a delivered item work as promised do not necessarily constitute acceptance of known nonconformity, particularly where the buyer communicates nonacceptance (including requesting removal).
- When contract-price recovery fails for lack of substantial performance, any recovery may depend on a non-contract theory for benefits retained (if applicable), rather than enforcement of the agreed price.

## Conclusion

Because the boiler delivered materially failed the contract’s essential capacity requirement, the seller could not rely on substantial performance to recover the contract price, and the buyer’s attempted use did not, by itself, amount to acceptance that eliminated the right to refuse payment for nonconforming performance.


Manitowoc Steam Boiler Works v. Manitowoc Glue Co., 120 Wis. 1, 97 N.W. 515 (Wis. 1903)