## Facts

- Midwest Grain Products of Illinois, Inc. contracted in 1993 with Productization, Inc. (PI) to purchase two grain dryers for its Illinois facility.
- PI separately contracted with CMI Corp. (CMI) to manufacture the dryers to Midwest’s specifications.
- CMI conditioned acceptance of PI’s order on receiving a letter from Midwest agreeing to make payments by checks payable jointly to PI and CMI; Midwest provided the letter.
- Midwest had no direct purchase contract with CMI and did not sign the CMI–PI contract.
- The CMI–PI contract contained warranty language and warranty limitations/disclaimers, including limiting remedies to repair or replacement and excluding consequential damages.
- After installation, Midwest alleged serious performance and design problems with the dryers and sued PI and CMI in federal court on warranty-based theories.
- Midwest settled with PI and pursued CMI, arguing (among other theories) that it could enforce CMI’s warranties as an intended third-party beneficiary of the CMI–PI contract.
- The district court granted summary judgment to CMI on Midwest’s claims and denied CMI’s request for attorney’s fees.
- Midwest appealed the summary judgment; CMI cross-appealed the denial of fees.

## Issues

1. Whether Midwest could hold CMI liable for breach of warranty based on (a) an express warranty made directly by CMI to Midwest, or (b) Midwest’s status as an intended third-party beneficiary of the CMI–PI contract under Oklahoma law.
2. Whether CMI was entitled to attorney’s fees from Midwest, including which state’s law governed fee entitlement and whether any statute or contract authorized fees.

## Decision

- The Seventh Circuit affirmed summary judgment for CMI on Midwest’s warranty claims.
- The court held Midwest produced insufficient evidence that CMI made any express warranty directly to Midwest.
- The court held Midwest was not an intended third-party beneficiary of the CMI–PI contract under Oklahoma law.
- The court affirmed denial of CMI’s request for attorney’s fees, applying Illinois law and finding no statutory or contractual basis for fee shifting.

## Legal Principles

- An express warranty requires an affirmation of fact or promise that can reasonably be understood as a warranty; a payment-assurance communication, without quality or performance commitments, does not create an express warranty.
- Under Oklahoma law, third-party beneficiary enforcement requires proof that the contracting parties expressly intended to benefit the third party; mere knowledge that an end user will receive the goods is insufficient.
- Contracting parties may modify their agreement, including adding warranty limitations and disclaimers, unless a third party’s rights have vested; potential beneficiary status alone does not bar later modifications.
- In diversity cases filed in Illinois, entitlement to attorney’s fees is treated as procedural for choice-of-law purposes; Illinois law governs and follows the American Rule absent a clear statutory or contractual fee-shifting authorization.

## Conclusion

The Seventh Circuit held that the end user could not recover from the manufacturer on warranty theories without proof of a direct express warranty or intended third-party beneficiary status under the manufacturer–intermediary contract, and it upheld denial of the manufacturer’s attorney’s fees because Illinois law supplied no basis for shifting fees.


Midwest Grain Prods. of Ill., Inc. v. Productization, Inc., 228 F.3d 784 (7th Cir. 2000)