Fire Ass'n of Philadelphia v. Allis Chalmers Mfg. Co., 129 F. Supp. 335 (N.D. Iowa 1955)

GRAVEN, District Judge.

The defendant is a corporation organized and existing under the laws of the State of Delaware. All of the plaintiffs

are corporations. They were organized and exist under the laws of States other than Delaware. The plaintiffs and the defendant have all qualified to do business in Iowa. The amount in controversy, exclusive of interest and costs, is in excess of $3,000.

The Iowa Public Service Company is a corporation organized and existing under the laws of the State of Iowa. It is engaged, among other things, in the generation, transmission, sale, and distribution of electricity in Northern Iowa and elsewhere. • At Waterloo, Iowa, at what is known as Maynard Station, it maintains and operates an electric generating plant. In 1951 it completed the construction of a new switch house at its Maynard Station. For a considerable period of time in advance of the completion of the switch house, the Iowa Public Service Company had been planning for and negotiating for the purchase of electrical equipment to be placed in it.

The defendant is engaged, among other things, in the manufacture and sale of electrical equipment. Its principal place of business is at Milwaukee, Wisconsin. Its plant for the manufacture of electrical equipment is located at Boston, Massachusetts. It maintains a District Office at Kansas City, Missouri. J. F. Pritchard & Company was the agent of the Iowa Public Service Company in connection with the purchase and installation of the electrical equipment in the new switch house. The Iowa Public Service Company purchased from the defendant for use in the new switch house certain electrical equipment known as switchgear equipment. That equipment was installed by the Iowa Public Service Company. The equipment was contained in nine metal cubicles placed in a row in the switch house. The cubicles are referred to by Numbers 1 to 9.

On the morning of April 14, 1952, around 7:20 A. M., an employee of the defendant, in connection with the routine operation of the Station, operated the switch to put the equipment contained in Cubicle No. 2 in operation. In about ten minutes there occurred in the switch house what is described as fire and explosion followed by complete power failure. The mishap had its origin in Cubicle No. 2 due to unusually high heat that had been generated in it. The high heat almost completely destroyed Cubicle No. 2 and the equipment contained therein. It damaged Cubicles No. 1 and No. 3 so badly that they had to be replaced. Extensive fire and heat damage was also caused to the switch house and other equipment therein.

The plaintiffs had written insurance policies insuring the Iowa Public Service Company against losses of the kind occasioned by the mishap. They paid the Iowa Public Service Company the sum of $28,842.32 in settlement of those losses. In the subrogation receipts it is recited that the payments were made by the plaintiffs to the Iowa Public Service Company “for loss and damage by fire” paid by the plaintiffs. The sum did not include Cubicle No. 2 and the equipment contained therein which was replaced by the defendant at a cost of $8,165 without charge to the Iowa Public Service Company. The plaintiffs, as subrogees of the Iowa Public Service Company, seek in this action to recover the sum of $28,-842.32 so paid by them.- It is the claim of the plaintiffs that the defendant was guilty of negligence in the manufacture and inspection of the electrical equipment contained in Cubicle No. 2. The defendant denies the charge of negligence. The defendant also raises an affirmative defense. It contends that the equipment in question was purchased from it by the Iowa Public Service Company under a certain contract or contracts and that under a responsibility limitation provision contained therein the Iowa Public Service Company could not assert the claim now sought to be asserted by the plaintiffs and that the plaintiffs' as subrogees of the Iowa Public Service Company may not do so. The plaintiffs deny that the equipment in question was purchased under the contract or contracts referred to by the defendant. In the alternative, it is the claim of the plaintiffs that if the Iowa

Public Service Company did purchase the equipment in question under the contract or contracts in question, the responsibility limitation provision contained therein ' is invalid. Further, in the alternative, it is the claim of the plaintiffs that if the Iowa Public Service Company did purchase the equipment in question under the contract or contracts referred to, and the responsibility limitation provision contained therein is valid, yet the claim herein asserted does not come within the scope of that provision. The contention of the defendant that the plaintiffs may not assert the claim they now seek to assert and the counter-contentions of the plaintiffs in that connection will next be considered. Since J. F. Pritchard & Company acted for the Iowa Public Service Company in connection with its purchase of the electrical equipment in question, the connection of J. F. Pritchard & Company with the purchase will be referred to as that of the Iowa Public Service Company.

It appears that the Iowa Public Service Company had sometime prior to August 17, 1948, sent to the defendant what is referred to as “purchaser’s specification No. P-1251 dated 5/12/48,” relating to the equipment for its Maynard Station. In response thereto, the defendant prepared specifications for the switchgear equipment of the type and kind desired by the Iowa Public Service Company. These specifications were dated August 17, 1948, and were labelled No. I-19-8A. On or about February 4, 1949, the defendant mailed to the Iowa Public Service Company a document entitled “Proposal and Contract.” Submitted with and as a part of the “Proposal and Contract” were the specifications dated August 17, 1948, and labelled No. 1-19-8A. On the first page of the “Proposal and Contract” the following appears in typewriting:

In the “Proposal and Contract” there are a number of typewritten provisions. Most of them relate to the contract price for the electrical equipment described. In the provision which is designated as the “Base Proposal” the “contract price” is given as $46,669 plus $1,982 for a “Neutral Breaker.” There is also included in the provisions relating to the “contract price” a number of Alternates designated as Alternate No. 1 through Alternate No. 6 inclusive. In Alternate No. 4 the “contract price” is given as $47,885 plus $1,982 for a “Neutral Breaker,” or a total of $49,867. Other typewritten provisions in the “Proposal and Contract” relate to delivery and payment. The balance of the “Proposal and Contract” consists of printed provisions. Among the printed provisions is a responsibility limitation provision. The “Proposal and Contract” is on a standard form used by the defendant in connection with its sales. The “Proposal and Contract” has lines at the end for the signature of the defendant. At the end the following appears:

The “Proposal and Contract” contains the following provision:

The “Proposal and Contract” sent to the defendant was signed in behalf of the defendant by C. J. Schutty. That signed copy was received by the Iowa Public Service Company on March 4, 1949.

On March 10, 1949, the Iowa Public Service Company signed a document entitled “Purchase Order” and mailed it to the defendant at its Kansas City District Office. On the front of that document there appears, among other matters, the following:

There were several pages attached to the “Purchase Order” which are designated as “Continuation Sheets” which contain specifications for the equipment. On “Continuation Sheet” designated as Page (6) the purchase price of the equipment is given as:

That purchase price is the “contract price” contained and given in Alternate No. 4 of the defendant’s “Proposal and Contract” of February 4, 1949, to which reference is made in the “Purchase Order.”

On March 21, 1949, C. J. Schutty of the defendant’s Kansas City, Missouri, District Office by letter acknowledged receipt of the “Purchase Order” of March 10, 1949. In the letter it was stated that the order was subject to acceptance at the defendant’s main office.

It later developed that there was an error in the original set of specifications which had carried through to the “Purchase Order.” Thereupon the defendant prepared revised specifications. The revised specifications are dated June 9, 1950, and are labelled No. I-19-8A. On June 15, 1950, the defendant mailed the Iowa Public Service Company copies of the revised specifications and a document entitled “Proposal and Contract.” Attached to and a part of that “Proposal and Contract” is a copy of the revised specifications. The “Proposal and Contract” is dated June 9,1950. It is signed at the end by A. W. Leighton. On the first page thereof the following appears in typewriting:

In the “Proposal and Contract” there are a number of typewritten provisions, including a provision as to the , contract price. The contract price is set forth as $49,867. Other typewritten provisions relate to delivery and payment. The balance of the “Proposal and Contract” consists of printed provisions. Among the printed provisions is a responsibility limitation provision. This “Proposal and Contract” is made on the same standard form that was used for the “Proposal and Contract” previously referred to.

The documents dated February 4, 1949, and June 15, 1950, sent by the defendant to the Iowa Public Service Company are both designated “Proposal and Contract” on the first page thereof. In each instance that designation designates one and the same document. In the negotiations between the defendant and the Iowa Public Service Company when reference is made to either of those documents such document is referred to interchangeably as a “Proposal” or as a “Contract.” Since the same document is designated both as a “Proposal” and as a “Contract,” such document would seem to have the status of a “Proposal” until accepted by the purchaser after which it would have the status of a “Contract.”

On June 21, 1950, R. E. Burlingame in behalf of the Iowa Public Service Company wrote a letter to the defendant containing a tabulation relating to the “sequence”. Enclosed with the letter was a sketch sheet relating to the “sequence”.

On August 2, 1950, the defendant wrote the following letter to the Iowa Public Service Company:

On August 10, 1950, the defendant wrote the following letter to the Iowa Public Service Company:

Chalmers specifications I-19-8A, revised June 9, 1950 with the following exceptions:

On September 5, 1950, the Iowa Public Service Company signed a document entitled “Change Order” and mailed it to the defendant at its Kansas City, Missouri, District Office. On the front part of that document there appears, among other matters, the following:

There were “Continuation Sheets” attached to the “Change Order.” On what is designated as “Continuation Sheet-Page Six” the purchase price is $49,-867. That purchase is the “contract price” contained and given in the defendant’s “Proposal and Contract” dated June 9, 1950.

The equipment was then manufactured and delivered by the defendant to the Iowa Public Service Company at its Maynard Station and payment was made therefor by the Iowa Public Service Company. The equipment was installed in the new switch house in October, 1951. It was put into operation on November 16, 1951. The “Proposal and Contract” dated February 4, 1949, and the “Proposal and Contract” dated June 9, 1950, both contained a provision which provides that if the equipment was installed under the supervision of employees of the defendant the Iowa Public Service Company would reimburse the defendant for the services of such employees at the rate of $5 per hour for straight time and time and one-half for overtime and their expenses. Anthony Schalk, an engineer in the employ of the defendant,. supervised the installation of . the equipment. On November 16, 1951, the defendant billed the Iowa

Public Service Company for Mr. Schalk’s time at the rate of $5 per hour for straight time and time and one-half for overtime and for his expenses. That bill was paid by the Iowa Public Service Company in December, 1951.

The Iowa Public Service Company did not sign on either the “Proposal and Contract” dated February 4, 1949, or the “Proposal and Contract” dated June 9, 1950. It kept both of them in its files. Both of them contain the following provision:

It is not disputed that the plaintiffs are the subrogees of the Iowa Public Service Company and that as such subrogees they stand in the position of that Company. For convenience in reference, the “Proposal and Contract” dated February 4, 1949, will be referred to as the Proposal of February 4, 1949, and the “Proposal and Contract” dated June 9, 1950, will be referred to as the Proposal of June 9, 1950.

It is the contention of the defendant that the equipment in question was purchased from it by the Iowa Public Service Company either under the Proposal of February 4, 1949, or the Proposal of June 9, 1950, or both. The defendant apparently regards the two proposals so related that the Proposal of June 9, 1950, could be regarded as a modification of the Proposal of February 4, 1949. The defendant claims that whatever that situation might be, both proposals contain the same responsibility limitation provision and that such provision became a part of the contract between it and the Iowa Public Service Company.

The plaintiffs deny that the equipment in question was purchased by the Iowa Public Service Company under either proposal. The plaintiffs contend that the “Change Order” of the Iowa Public Service Company dated September 5, 1950, “marked a new start on the part of” the Iowa Public Service Company “to place an order” and that that order embraced “all revisions to date with the defendant” and that the minds of the Iowa Public Service Company and the defendant never met as to the inclusion of the responsibility limitation provision in the contract between them; and that, therefore, the Iowa Public Service Company never accepted that provision or agreed to be bound by it.

The plaintiffs call attention to the following provision, which has been heretofore referred to, which is contained in both of the contracts.

the Company within 30 days from its date, and shall not be binding upon the Company until so accepted and returned, and approved in writing by an executive officer of the Company.”

As heretofore noted, the Proposal of February 4, 1949, was signed by C. J. Schutty in behalf of the defendant, and the Proposal of June 9, 1950, was signed by A. W. Leighton in behalf of the defendant. It is not the claim of the plaintiffs that C. J. Schutty and A. W. Leighton were not executive officers of the defendant. It is the claim of the plaintiffs that there is no showing of acceptance within 30 days or any acceptance of either proposal.

Section 554.3, Code of Iowa 1954, I.C.A. (Uniform Sales Act), provides, in part, as follows:

In 17 C.J.S., Contracts, § 34, page 362, it is stated: “Every agreement, whether written or oral, is the result of, and springs from, an offer and the acceptance thereof.” In 17 C.J.S., Contracts, § 36, page 363, it is stated: “An offer is the signification by one person to another of his willingness to enter into a contract with him on the terms specified in the offer, *.” A party who signs a proposed agreement and tenders such signed instrument to a party with whom he proposes to contract thereby makes an offer to such party in accord with the terms specified therein. Cohen v. New England Mut. Life Ins. Co., 7 Cir., 1944, 140 F.2d 1, 2, certiorari denied, 1944, 322 U.S. 744, 64 S.Ct. 1153, 88 L.Ed. 1576. The defendant by signing the Proposals of February 4, 1947, and June 9, 1950, and tendering them to the Iowa Public Service Company, thereby made an offer to the Iowa Public Service Company upon the terms specified therein. However, the document containing the offer also contained a provision relating to the acceptance thereof. That provision provided that such offer must be accepted by the Iowa Public Service Company within 30 days from the date of the contract. On March 9, 1949, the Iowa Public Service Company executed the written “Purchase Order” dated March 9, 1949, and mailed it to the defendant. That instrument clearly and definitely related to the offer of the defendant dated February 4,1949, and constituted a purported acceptance thereof. However, it was a belated acceptance. Section 73 of the Restatement of The Law of Contracts and Comment is as follows:

In the Iowa Annotations to that Section of the Restatement (p. 53), it is stated:

See also Wax v. Northwest Seed Co., 1937, 189 Wash. 212, 64 P.2d 513, 515. However, as heretofore noted, because of an error in the original set of specifications which was carried through into the “Purchase Order” dated March 9, 1949, new specifications were prepared

by the defendant. Thereafter the defendant tendered to the Iowa Public Service Company the contract dated June 9, 1950, which was based on the new specifications and which was signed by A. W. Leighton in behalf of the defendant. That proposed agreement constituted an offer to the Iowa Public Service Company upon the terms specified therein. However, the document containing the offer also contained a provision relating to the acceptance thereof. That provision provided that the offer must be accepted by the Iowa Public Service Company within 30 days from the date of the contract. On September 5, 1950, which was more than 30 days from the date of the contract, the Iowa Public Service Company executed the written “Change Order” dated September 5, 1950, and mailed it to the defendant. That “Change Order” clearly and definitely related to the offer of the defendant dated June 9, 1950, and constituted a purported acceptance of it. If that purported acceptance is regarded as an acceptance of the original offer of the defendant of June 9, 1950, it was a belated acceptance and constituted a counter-offer. On August 2, 1950, A. W. Leighton in behalf of the defendant wrote the Iowa Public Service Company a letter which has been heretofore set out. That letter contains the following paragraphs:

By this letter of August 2, 1950, the defendant renewed its offer contained in the contract dated June 9, 1950, modified in accordance with the letter of the Iowa Public Service Company of June 21, 1950. In this letter of August 2, 1950, the defendant invited the acceptance of the renewed offer therein contained by the reissue of “Purchase Order”. On August 10, 1950, A. W. Leigh-ton wrote another letter to the Iowa Public Service Company, which has heretofore been set out, which provided in part:

If the thirty-day limitation as to acceptance contained in the original offer of the defendant be regarded as applicable to the renewals thereof in the defendant’s letters of August 2 and August 10, 1950, it is to be noted that written “Change Order”' of the Iowa Public Service Company' was issued on September 5, 1950, which was within 30 days from August 10, 1950, and that the defendant in its letter of August 10, 1950, invited the Iowa Public Service Company to accept the offer therein contained by the issuance of such order. However, if the “Change Order” issued by the Iowa Public Service Company on September 5, 1950, is to be regarded as a counter-offer by it, acceptance of that offer by the defendant would be necessary. The shipment of goods by the seller to the purchaser following receipt of a written order constitutes an acceptance thereof. Petroleum Products Distributing Co. v. Alton Tank Line, 1914, 165 Iowa 398, 146 N.W. 52. In that case the defendant executed and delivered to the plaintiff orders for three

tank cars of gasoline. The plaintiff shipped the defendant three tank cars of gasoline. The shipment of the gasoline was the only evidence of acceptance on the part of the plaintiff. The defendant, when sued for the purchase price of the gasoline, claimed lack of evidence of acceptance on the part of the plaintiff. A lower court judgment in favor of the plaintiff was affirmed. The Iowa Supreme Court stated, at page 54 of 146 N.W.:

A written order for a machine is accepted by the delivery of the machine. Aultman, Miller & Co. v. Nilson, 1900, 112 Iowa 634, 84 N.W. 692. This is true even though the written instrument submitted to the intended seller contains a provision that it is not to be binding on the seller as a contract until approved by such seller. Minneapolis Threshing Mach. Co. v. Zemanek, 1906, 130 Iowa 120, 106 N.W. 512. A written instrument signed by one party orally accepted and acted upon by the other party becomes the contract between them. McDermott v. Mahoney, 1908, 139 Iowa 292, 115 N.W. 32, 35, 116 N.W. 788.

Following the receipt of the “Change Order” issued by the Iowa Public Service Company on September 5, 1950, the defendant manufactured and delivered to the Iowa Public Service Company the machinery which was the subject matter of that “Order”. If that “Order” is to be regarded as having the status of a counter-offer, then, under the authorities noted, such action on the part of the defendant constituted an acceptance of the counter-offer. As heretofore noted, that “Change Order” could be regarded as having the status of a valid acceptance of the defendant's offer as renewed. However, in either situation the question would be as to whether or not the resulting contract of sale included the responsibility limitation provision in question.

In order for a provision to be part of the contract between the parties the parties must have mutually asserted that it be a part of it.- There must be a meeting of the minds as to its inclusion. In the case of Industrial Products Mfg. Co. v. Jewett Lumber Co., 8 Cir., 1951, 185 F.2d 866, later appeal, 193 F.2d 571, in a case in which the law of Iowa was applicable, the United States Court of Appeals for this Circuit stated, 185 F.2d at page 869:

by the parties that constitutes' the contract which courts enforce. In Longmire v. Diagraph-Bradley Stencil Mach. Corp., Mo.App., 176 S.W. 2d 635, 646, it is said, ‘Though there must be a meeting of the minds of the parties to constitute a contract, such meeting of the minds is to be determined by the expressed, and not by the secret, intention of the parties.’

In the recent case of Rotterman v. General Mills, Inc., 1953, 61 N.W.2d 718, on pages 722 and 723, the Iowa Supreme Court stated:

If the “Change Order” issued by the Iowa Public Service Company on September 9, 1950, was a valid acceptance of the defendant’s offer, then the parties assented to the provisions included in the offer, one of which was the responsibility limitation provision in question. If that “Change Order” had the status of a counter-offer, then the parties assented to- the provisions included in that offer. Such provisions would include both the provisions contained in the “Change Order” itself and those included by reference.1 The “Change Order” includes by reference the defendant’s specifications No. 1-19-8A Revised June 9, 1950, the defendant’s Proposal dated February 4, 1949, and the defendant’s letters of August 2,1950, and August 10, 1950. The defendant’s specifications No. I-19-8A were an integral part of its Proposal of June 9, 1950. The defendant’s Proposal dated February 4, 1949, was a document which contained the responsibility limitation provision. The defendant’s letters of August 2 and August 10, 1950, both made specific reference to the defendant’s contract of June 9, 1950, which document contained the same provision.

The documents in evidence disclose that in every writing transmitted between the defendant and the Iowa Public Service Company during the course of the negotiations, except one, reference is made either to the defendant’s “Proposal” or “Contract,” which references are to documents which contain the re

sponsibility limitation provision. The exception is the letter of acknowledgment from C. J. Schutty dated March 21, 1949.

The written words used by the defendant and the Iowa Public Service Company during the course of their negotiations objectively manifested the intent on the part of both that the provisions contained in the document dated February 4, 1949, designated “Proposal and Contract” and in the document dated June 9, 1950, designated “Proposal and Contract,” except as later modified, were included in the contract of sale. The responsibility limitation provision contained in those documents was not among the provisions which were later modified.

It is the holding of the Court that the responsibility limitation provision was a part of the contract of sale between the Iowa Public Service Company and the defendant. See Nelson v. Swedish Hospital, Minn.1954, 64 N. W.2d 38, where it was held that a responsibility limitation provision contained in a booklet and instructions which accompanied the dating of an X-ray machine was binding.

The plaintiffs’ action is an action in tort based upon the claimed negligence of the defendant in the manufacture and inspection of the equipment contained in Cubicle No. 2. The plaintiffs do not claim that the defendant was guilty of a wilful, wanton or reckless wrong. The plaintiffs expressly assert that they are not suing for breach of warranty, either express or implied, or other contractual breach. It is the claim of the plaintiffs that the defendant was guilty of negligence as to the Iowa Public Service Company and that they may assert the claim of that Company based thereon against the defendant.

While a breach of contract is not a tort, yet a contract may establish a relationship between the parties or give them a status where the failure of either to exercise reasonable care would amount to a tort. Peitzman v. City of Illmo, 8 Cir., 1944, 141 F.2d 956, 961, certiorari denied, 1944, 323 U.S. 718, 65 S.Ct. 47, 89 L.Ed. 577, rehearing denied 323 U.S. 813, 65 S.Ct. 112, 89 L.Ed. 647; Smith v. Weber, 1944, 70 S.D. 232, 16 N.W.2d 537. See also Rice v. Sioux City Memorial Park Cemetery, Iowa 1953, 60 N.W.2d 110, 119, affirmed, 1954, 348 U.S. 880, 75 S.Ct. 122, 99 L.Ed. -, citing Smith v. Weber, supra. In the case of Peitzman v. City of Illmo, supra, the Circuit Court of Appeals for this Circuit succinctly stated, 141 F.2d at page 961:

In the case of Smith v. Weber, supra, the South Dakota Supreme Court stated, at page 539 of 16 N.W.2d:

In the case of Randall v. M. M. Moen Co., 1928, 206 Iowa 1319, 221 N.W. 944, at page 945, the Iowa Supreme Court stated:

the breach of his contract or to sue in tort. If he sue for breach of contract, he waives the tort; and, if he sues in tort, he waives the breach of contract. He may ride either horse, but not both.”

Where the same act or omission constitutes both a breach of contract and a tort, the matter of whether the plaintiff proceeds in tort or on contract may be of legal significance. Many of the courts hold that a more liberal rule as to damages prevails if the action is in tort. 15 Am.Jur. p. 405. The Iowa Supreme Court is among the courts which so hold. Mentzer v. Western Union Tel. Co., 1895, 93 Iowa 752, 62 N. W. 1, 28 L.R.A. 72. In that case the Iowa Supreme Court, after referring to the case of Hadley v. Baxendale, 9 Exch. 341, in connection with the matter of damages for a breach of contract, stated, at page 3 of 62 N.W.:

Where the same act or omission is both a breach of contract and a tort, the matter of whether the plaintiff proceeds in tort or on contract may be of legal significance in connection with a responsibility limitation provision contained in the contract between the parties. Some courts give such a provision a much more strict and restricted construction when it is sought to assert it in connection with a claim based on negligence than they do when it is sought to be asserted against a claim based on breach of contract.

In the present case the contract between the defendant and the Iowa Public Service Company gave rise to the duty on the part of the defendant to exercise reasonable care in manufacturing and inspecting the equipment in question and that if the defendant failed to exercise such care it was guilty of negligence as to the Iowa Public Service Company. Such omission would also be a breach of the contract between the defendant and the Iowa Public Service Company. Therefore, the Iowa Public Service Company could have, except so far as limited or prevented by the responsibility provision in question, proceeded against the defendant either in tort or on contract. The' plaintiffs as subrogees of the Iowa Public Service Company elected to proceed in tort. Where, as between the parties to a contract, an omission by one of the parties is a breach of contract and because of the contract also a tort as to the other party, such other party by suing in tort instead of on contract does not thereby render nugatory a responsibility limitation provision contained in the contract. In that situation the question is' whether the responsibility limitation provision is to be construed as limiting the liability of the defendant for negligence or exonerating the defendant from liability for negligence.

There is next to be considered the matter of the applicable law. The present action is based on diversity of citizenship. Under Klaxon Co. v. Sten

tor Electric Mfg. Co., 1941, 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477, it is the duty of this Court to apply the Iowa conflict of laws rule. See Aluminum Co. of America v. Hully, 8 Cir., 1952, 200 F.2d 257, 261. In the case of Haverly v. Union Const. Co., 1945, 236 Iowa 278, 18 N.W.2d 629, at page 633, the Iowa Supreme Court stated:

See also Pasquel v. Owen, 8 Cir., 1950, 186 F.2d 263, 272. In the ease of County Sav. Bank v. Jacobson, 1927, 202 Iowa 1263, 211 N.W. 864, it was held that the last act necessary to complete a contract is acceptance. It stated, at pages 865, 866 of 211 N.W.:

In the present action the “Change Order” of September 5, 1950, is regarded as an acceptance of the defendant’s offer that acceptance took place in Iowa. If that “Order” is regarded as a counter-offer it was accepted by the delivery of the electric equipment to the Iowa Public Service Company. That delivery took place in Iowa. Therefore, it is clear that the applicable substantive law is that of Iowa.

It is the claim of the plaintiffs that, even if as claimed by the defendant the responsibility limitation provision does by its terms purport to relieve the defendant from liability for negligence, it is invalid. It is the contention of the plaintiffs that a party may not contract against the consequences of his negligence. They cite in support of that contention a statement to that effect contained in the opinion in the case Randall v. M. M. Moen Co., 1928, 206 Iowa 1319, 221 N.W. 944.

There are a number of Iowa cases in which the matter of the validity of a provision relieving a party from negligence has been passed on or referred to. The question first came before the Iowa Supreme Court in the case of Gris-wold v. Illinois Cent. R. Co., citations infra. In that ease the lease between the railroad company and Griswold, leasing the latter a portion of the former’s right of way for use for elevator purposes, contained a provision relieving the company from liability for damage by fire negligently communicated to Griswold’s buildings on the leased premises by the company’s engines. Due to the negligence of the company, fire was communicated to Griswold’s buildings by one of its engines. When sued by Griswold for the damages sustained by him because of such negligence, the company set up the provision referred to as a defense. Griswold asserted that the provision was void. The Iowa Supreme Court first held that the provision was void, 1892, 53 N.W. 295. It then granted a rehearing and on rehearing in an opinion of considerable length in which the matter of the validity of the provision is considered at length it reversed its previous holding and held that the provision was valid, 1894, 90 Iowa 265, 57 N.W. 843, 24 L. R.A. 647. The holding in the Griswold case was followed by the Iowa Supreme Court in Kennedy v. Iowa State Ins. Co., 1902, 119 Iowa 29, 91 N.W. 831; City of New York Ins. Co. v. Chicago, B. & Q. Ry. Co., 1913, 159 Iowa 129, 140 N.W. 373; Gerlach v. Grain Shippers’ Mut. Fire Ins. Ass’n, 1912, 156 Iowa 333, 136 N.W. 691. The Griswold case has been recognized and followed by the federal courts in cases in which the Iowa law was under consideration. Hartford Fire Ins Co. v. Chicago, M. & St. P. Ry. Co., C.C.Iowa 1894, 62 F. 904; same case 8 Cir., 1895, 70 F. 201, 30 L.R.A. 193, same case, 1898, 175 U.S. 91, 20 S.Ct. 33, 44 L.Ed. 84. In the case of Gerlach v. Grain Shippers’ Mut. Fire Ins. Ass’n the Iowa Supreme Court stated, at page 693 of 136 N.W., that

it was “competent” for a lessee in leasing property “to release the lessor from obligation for any injury the lessor may occasion by his negligence.” In the case of Lunt v. Grand Lodge Ancient Order United Workmen, 1929, 209 Iowa 1138, 229 N.W. 323, at page 324, the Iowa Supreme Court stated, that parties to a contract “may also specify the terms and conditions of liability, even though without the contract, recovery might be had.” That Court makes the same statement in the case of Roeh v. Business Men’s Protective Ass’n, 1914, 164 Iowa 199, 145 N.W. 479, at page 482, 51 L.R.A., N.S., 221. In both cases the Griswold case is cited in support of the statement. In the case of Andrew v. Breon, 1929, 208 Iowa 385, 226 N.W. 75, at page 78, the Iowa Supreme Court stated that “courts should be cautious in nullifying contracts.” The Griswold case, among other cases, is cited in support of the statement.

The ease of Randall v. M. M. Moen Co., 1928, 206 Iowa 1319, 221 N.W. 944, which, as heretofore noted, is relied on by the plaintiffs in this connection, was an action in tort by a third person who was engaged in the construction of a building under a contract with the owner of the premises. The question arose as to the materiality of that contract. The Court, after passing upon that question, stated, at page 945 of 221 N.W.: “ The defendant may not contract against the consequences of his negligence; That question was not involved in the case. The Court made no reference to its earlier holdings in Gris-wold v. Illinois Cent. R. Co., supra, Kennedy v. Iowa State Ins. Co., supra, and Gerlaeh v. Grain Shippers’ Mut. Pire Ass’n, supra, in which it had upheld the validity of a contractual provision relieving a party from the consequences of his own negligence. The statement referred to is relied on by the plaintiffs in support of their contention as to validity. The statement was clearly dictum and has not been referred to by the Iowa Supreme Court since. Sections 574 and 575 of Restatement, Law of Contracts, are as follows:

It is believed that the Iowa law is in accord with those Sections.

In the case of Aluminum Co. of America v. Hully, 8 Cir., 1952, 200 F.2d 257, involving an indemnity agreement where the Pennsylvania law was held to be applicable, the United States Court of Appeals for this Circuit stated, at page 261:

the owner or otherwise was valid and was not against public policy or void under Pennsylvania law, or the law generally. » (Emphasis supplied.)

It is the claim of the plaintiffs that the public character of the Iowa Public Service Company is of significance on the question under consideration. In their complaint the plaintiffs allege:

It is the contention of the plaintiffs that it would be against public policy to allow those furnishing electrical equipment to public utilities of the character and in the situation of the Iowa Public Service Company to relieve themselves from liability for negligence in connection with the equipment furnished.

Section 575 of Restatement of the Law of Contracts, heretofore set out, lists among the exemptions to the general rule stated in Section 574 the following:

The rule contained in that exception is in accord with the general rule. However, that rule is not applicable to the contracts of a party charged with public service in connection with a contract with a party to whom such party is not rendering public service. Sante Fe, Prescott & Pheonix Railway Company v. Grant Brothers Construction Company, 1913, 228 U.S. 177, 185, 33 S.Ct. 474, 57 L.Ed. 787; Griswold v. Illinois Cent. R. Co., 1894, 90 Iowa 265, 57 N.W. 843, 24 L.R.A. 647. In the case of Santa Fe, Prescott & Phoenix Railway Company v. Grant Brothers Construction Company, supra, the United States Supreme Court, in referring to the rule, stated, at page 185 of 228 U.S., at page 477 of 33 S.Ct.:

In the present case the Iowa Public Service Company was free to enter into contracts with whom it wished upon such terms as it found acceptable for the acquisition of electrical equipment.

It is believed that under the Iowa law the Iowa Public Service Company and the defendant could validly contract to release or limit the liability of the defendant for negligence in connection with the equipment in question.

It is the contention of the plaintiffs that even if the Iowa Public Service Company and the defendant could validly contract to limit the liability of the defendant for negligence or relieve it from negligence, yet the responsibility limitation provision in the contract between them did not so limit or relieve.

The last sentence of that provision provides as follows: “The Company shall not in any event be liable for indirect or consequential damage.” The defendant does not particularly stress this portion of the provision; it places particular stress on other parts of the provision. In some cases in which a re

sponsibility limitation provision has been considered, the courts have had before them the question of what constitutes “consequential damages” within the terms of such a provision which provides that the vendor shall not be liable for such damages. Nelson v. Swedish Hospital, Minn.1954, 64 N.W.2d 38; Despatch Oven Co. v. Rauenhorst, 1949, 229 Minn. 436, 40 N.W.2d 73; Otis Elevator Co. v. Standard Const. Co., D.C.Minn. 1950, 92 F.Supp. 603. The famous English case of Hadley v. Baxendale, 9 Exch. 341, 156 Eng. Reprint 145, 5 Eng.Rul. Cases 502, defined consequential damages. The Minnesota Court follows Hadley v. Baxendale. See cases last cited. The Iowa Supreme Court also follows Hadley v. Baxendale. See Mentzer v. Western Union Tel. Co., 1895, 93 Iowa 752, 62 N.W. 1, 28 L.R.A. 72. The United States Court of Appeals for this Circuit has stated that there is confusion in the cases as to what constitutes consequential damages. United States v. Chicago, B. & Q. R. Co., 8 Cir., 1936, 82 F.2d 131, 136, 106 A.L.R. 942, certiorari denied, 1936, 298 U.S. 689, 56 S.Ct. 957, 80 L.Ed. 1408. Damages sustained by the explosion of a bottle containing a soft drink were held to be “special and consequential” within the purview of a provision in a sales contract excluding liability of the vendor for such damages. Maryland Cas. Co. v. Owens-Illinois Glass Co., D.C.W.Va. 1953, 116 F.Supp. 122.

It might be that some of the damages sustained by the Iowa Public Service Company for which recovery is sought herein might have the status of consequential damages under Hadley v. Baxendale, supra; Otis Elevator Co. v. Standard Const. Co., supra; Nelson v. Swedish Hospital, supra. However, the subrogation receipts heretofore referred to merely recite that the payment was made for loss and damage by fire. Due to the heat-generating proclivity of electricity when not properly conducted or transmitted it would seem where a fire has its origin in excessive heat occasioned by a defect in the instrumentality by which electricity is handled such fire would be regarded as being directly and proximately caused by the defect and the damages occasioned by the fire would be neither indirect nor consequential. See Roller v. Independent Silo Co., 1952, 242 Iowa 1277, 49 N.W.2d 838, 842.

In the present case it is clear that the damage was caused by the excessive heat generated in Cubicle No. 2. If that excessive heat was generated because of a defect in the equipmént contained therein and the presence of that defect was due to negligence on the part of the defendant, it would seem that the damages caused to the equipment and the switch house thereby for which recovery is sought herein could not be regarded as indirect or consequential.

The plaintiffs contend that even if the Iowa Public Service Company and the defendant could validly contract to relieve the defendant from the consequences of its own negligence yet the language of the provision does not do so. The defendant contends that the language of. the provision does relieve it from the consequences of the claimed negligence. The defendant places stress on the following language in the provision :

The plaintiffs call attention to the fact that the word “negligence” is not used in the provision and that the provision is a printed provision drafted entirely

by the defendant. The plaintiffs suggest that the absence of the word “negligence” from the provision when it might easily have been included in it when it was being drafted by the defendant is of significance.

The question as to whether the language used by the parties in a contract encompasses negligence has arisen most frequently in connection with indemnity contracts or contracts containing an indemnity provision.

In the case of Chicago & N. W. R. Co. v. Chicago Packaged Fuel Co., 7 Cir., 1950, 183 F.2d 630, at page 632, the Court stated:

In the case of Santa Fe, Prescott & Phoenix Railway Company v. Grant Brothers Construction Company, 1913, 228 U.S. 177, 33 S.Ct. 474, 57 L.Ed. 787, there was involved a contract between a railroad company and a contractor relating to the grading of a branch line. The contract also covered the matter of transportation of the contractor’s men and supplies by the company. Some of the contractor’s supplies were destroyed by fire while in railroad cars on a siding. The contractor brought an action against the railroad company claiming that the fire was caused by the negligence of the railroad company. The contract between the railroad company and the contractor contained a provision “ ‘that the company shall assume no obligation or risk in case of accident or damage to men and supplies.’ ” The word “negligence” v/as not used in the provision. The contractor claimed that the railroad company could not validly contract against liability for its own negligence. The contractor also claimed that the provision did not encompass such negligence. The United States Supreme Court held that the provision barred recovery by the contractor. That Court stated, at pages 188, 189, of 228 U.S., at page 478 of 33 S.Ct.:

It further stated, at page 192 of 228 U.S., at page 480 of 33 S.Ct., that there was “ ‘no reason why the ordinary rules of construction should not obtain, and the contract be given effect according to the intention of the parties.' ” It further stated, at page 190 of 228 U.S., at page 479 of 33 S.Ct., that the parties “evidently had negligence in view.” It further stated, at page 192 of 228 U.S., at page 480 of 33 S.Ct.:

have the right to provide by apt language against liability for negligence *.’ ” (Emphasis supplied.)

In the case of Ringling Bros.-Barnum & Bailey Combined Shows v. Olvera, 9 Cir., 1941, 119 F.2d 584, the Court had under consideration a provision in a contract which was relied upon by one of the parties to it as exempting it from its own negligence. The Court stated, at pages 586, 587:

In accord with the view that a provision may encompass a party’s own negligence even though it does not contain the word “negligence” are the cases of Griffiths v. Broderick, 1947, 27 Wash.2d 901, 182 P.2d 18, 175 A.L.R. 1, and Payne v. National Transit Co., D.C.Pa.1921, 300 F. 411, affirmed, National Transit Co. v. Davis, 3 Cir., 1925, 6 F.2d 729, certiorari denied, 1925, 269 U.S. 579, 46 S.Ct. 104, 70 L.Ed. 422.

It seems clear that it is not necessary that the parties make use of the word “negligence” in a provision in order to make the provision applicable to a party’s own negligence and that it is sufficient if the parties by “apt language” include such negligence.

It is the claim of the plaintiffs that the strict construction rule is applicable to the provision in question in this ease. In some of the cases the matter of the applicability or non-applicability of the strict construction rule has had to do with the question as to whether a particular provision encompassed a party’s own negligence at all where there is no specific reference thereto. In other cases where specific reference has been made to a party’s own negligence either specifically or by apt words, the matter of the applicability or non-applicability of the strict construction rule has to do with the scope of the coverage of the provision. The Iowa Supreme Court has not as yet specifically stated its views as to the applicability or non-applicability of the strict construction rule to contractual provisions relating to a party’s own negligence. In the case of City of New York Ins. Co. v. Chicago, B. & Q. Ry. Co., supra, the Iowa Supreme Court upheld such a provision where the provision was at page 375 of 140 N.W., “to say the least, very queerly worded.”

The case of Oscar Ruff Drug Co. v. Western Iowa Co., 1921, 191 Iowa 1035, 181 N.W. 408, 15 A.L.R. 962, involved a provision in a lease of a business building exempting the landlord from his own negligence. The lessee’s stock of merchandise on the leased premises was destroyed by a collapse of the building and ensuing fire. The collapse was due to the lessor’s negligence in connection with the making of repairs and alterations to the building. The lessee brought an action against the lessor for the damages sustained by him by reason of the lessor’s negligence. The lessor relied upon the provision in the lease exempting him from liability for his own negligence. The Iowa Supreme Court held that the lessee’s action was not barred by that

provision. The Iowa Supreme Court stated at page 412 of 181 N.W.:

The case of Mortrude v. Martin, 1919, 185 Iowa 1319, 172 N.W. 17, was an action brought by the employee of a lessee of a business building in the course of construction against the lessor and the lessor’s architect and engineer. The plaintiff’s employer had moved into the first floor of the building as soon as that part was built. The lessor continued the construction work above. The plaintiff claimed that as the result of negligence on the part of the lessor in connection with the further construction plaster fell from the ceiling. He sought to recover damages for the injuries resulting therefrom. The lease between the plaintiff’s employer and the lessor contained a provision that the lessor could continue to build the building higher without the consent of the lessee or “without any claim” from the lessee. The lessor asserted that provision as a bar to the plaintiff’s action. It was apparently assumed or conceded by the parties that the plaintiff was in the same position as his employer as to that provision. The jury returned a verdict for the plaintiff. On appeal the judgment, based on the verdict, was affirmed. The Iowa Supreme Court stated, at page 21 of 172 N.W.:

The matter of the construction of a provision in a contract which has to do with limitation of liability for negligence has been before the United States Court of Appeals for this Circuit in a number of fairly recent cases. None of them had to do with the law of Iowa. The case of General Mills, Inc. v. Goldman, 8 Cir., 1950, 184 F.2d 359, certiorari denied, 1951, 340 U.S. 947, 71 S.Ct. 532, 95 L.Ed. 683, was an action brought by the plaintiff, who was an assignee of the lessor, against the lessee for the destruction of a building on the leased premises. It was the claim of the plaintiff that the fire was caused by the negligence of the defendant. The defendant pleaded as a defense a provision in the lease which it claimed exonerated it from the claimed liability. The trial court was of the view that since the provision related to the exoneration of the defendant for its own negligence the provision should be strictly construed against it and held that the defendant was not exonerated from the claimed liability thereunder. On appeal the United States Court of Appeals reversed. It stated that the words used in the provision should not be

given a narrower meaning than they have in common parlance.

The case of Aluminum Co. of America v. Hully, 8 Cir., 1952, 200 F.2d 257, involved the scope of coverage of a provision in a construction contract between the owner and a contractor providing for indemnity to the owner against its negligence. The trial court was of the view that the provision should be strictly construed. It so construed the provision and denied the owner’s claim for indemnity thereunder. On appeal the United States Court of Appeals reversed. The Court held that the words used were to be given their ordinary and usual significance. It held that the owner’s claim for indemnity should be granted.

The case of Minneapolis-Moline Co. v. Chicago, M., St. P. & P. R. Co., 8 Cir., 1952, 199 F.2d 725, involved an indemnity provision in an industrial track contract between a railroad company and a party whose plant was located on one of the company’s industrial tracks. The provision did not specifically refer to the matter of the railroad company’s own negligence. The railroad company claimed indemnity under the provision for a judgment rendered against it based on its negligence. The trial court held that the railroad company was entitled to be indemnified thereunder. On appeal the United States Court of Appeals affirmed. That Court stated, at page 729:

It further stated, at page 730:

It further stated, at page 731:

The case of Ocean Accident & Guarantee Corp. v. Jansen, 8 Cir., 1953, 203 F. 2d 682, was an action brought by the subrogee of the lessor against the lessee under an indemnity provision contained in the lease covering a premises used for tavern purposes. A tavern customer died as the result of injuries received on a stairs in the tavern. The personal representative of the decedent made claim against the lessor for his injuries, asserting that the stairs on which the decedent was injured did not comply with the provisions of an ordinance of the City of Omaha as to the width of the treads and as to a handrail. The lessor’s insurer made settlement with the customer’s personal representative and brought an action to recover the amount so paid under the indemnity provision in the lease. The trial court denied recovery. On appeal the United States Court of Appeals affirmed. The indemnity provision provided, in part, at page 683, that:

The Court stated, at page 685:

own negligent acts, where such intention is not expressed in unequivocal terms. North American Ry. Construction Co. v. Cincinnati Traction Co., 7 Cir., 172 F. 214, 215; Washington & Berkeley Bridge Co. v. Pennsylvania Steel Co., 4 Cir., 215 F. 32; Perry v. Payne, 217 Pa. 252, 66 A. 553, 11. L.R.A.,N.S., 1173, 10 Ann.Cas. 589; Mitchell v. Southern R. Co., 124 Ky. 146, 74 S.W. 216; Wallace v. United States, D.C., 16 F. 2d 309; [United States v. Wallace] 9 Cir., 18 F.2d 20; Buckeye Cotton Oil Co. v. Louisville & N. R. Co., 6 Cir., 24 F.2d 347; 31 C.J. 431; 14 R.C.L. 47.’

As heretofore noted, the.Iowa Supreme Court held in the case of Oscar Ruff Drug Co. v. Western Iowa Co. that broad and sweeping general terms in a lease as to the non-liability of a lessor for his own negligence will not be held to be applicable to a situation which manifestly could not have been within the contemplation of the lessee and the lessor.

The plaintiffs cite and rely upon the case of Doughnut Mach. Corporation v. Bibbey, 1 Cir., 1933, 65 F.2d 634. In that case the defendant leased a doughnut making machine to the plaintiff. While the'plaintiff was engaged in operating the machine, it jammed and splashed hot grease on the plaintiff causing her serious injury. She sued the defendant in tort for negligence, claiming that the defendant had been guilty of negligence in assembling or adjusting the ejector on the machine. The defendant set up a provision in the lease as a bar to the plaintiff's claim. On appeal the judgment in favor of the plaintiff was affirmed. The Court, in passing upon the provision as a claimed bar to the plaintiff’s action, stated, at page 637:

The Court stated, at page 635, that the action being between the parties to the contract the doctrine of the case of MacPherson v. Buick Motor Co., 1916, 217

N.Y. 382, 111 N.E. 1050, L.R.A.1916F, 696, Ann.Cas.l916C, 440, was not involved. The Court also stated that the rule of res ipsa loquitur was not applicable. There is a case comment on this case in 22 Illinois Bar Journal, 309-310 (1934).

None of the cases heretofore referred to have involved vendor-vendee contracts. Those contracts frequently contain a responsibility limitation provision. In a number of cases the question has arisen as to whether the language used in a particular responsibility limitation provision in a vendor-vendee contract encompassed negligence of the vendor. The courts which have to do with that question seem fairly well agreed that a responsibility limitation provision in a vendor-vendee contract need not contain the word “negligence” in order to encompass the negligence of the vendor and that it is sufficient if the words used by the parties when given their ordinary and usual significance do manifest the intent of the parties to encompass such negligence.

In the case of Hall-Scott Motor Car Co. v. Universal Ins. Co., 9 Cir., 1941, 122 F.2d 531, 533, certiorari denied, 1941, 314 U.S. 690, 62 S.Ct. 360, 86 L.Ed. 552, the subrogee of the owner of a power cruiser sought to recover from the vendor of an engine for the cruiser for the destruction of the cruiser by a fire allegedly caused by the negligence of the vendor in connection with the installation of the engine. The vendor relied upon a provision in the contract of sale as a bar to the action. The pertinent portion of the provision was as follows: “ ‘It is understood further Hall-Scott will not be held responsible for any damage to cruiser “Pacifica” * while the engine installation is being made.’ ” The Court referred to the fact that negligence of the vendor is not specifically referred to. The Court held that the provision was valid and exempted the vendor from liability for its own negligence in connection with the fire.

In the frequently cited case of Charles Lachman Co. v. Hercules Powder Co., D.C.Pa.1948, 79 F.Supp. 206, the plaintiff, a carpet manufacturer, sought to recover damages for loss of carpet by a fire claimed to have been caused by the spontaneous ignition of a chemical compound purchased by it from the defendant which had been used in connection with the sizing of the carpA. The contract of sale contained the following provision:

The motion of the defendant for a summary judgment based on that provision was sustained. The Court stated, at page 207:

The Court also stated, at page 207:

In the case of Fairbanks, Morse & Co. v. Consolidated Fisheries Co., 3 Cir., 1951, 190 F.2d 817, the plaintiff, as. the vendor of certain electrical, equipment, sought to recover for the purchase nrice

thereof. The defendant counterclaimed for breach of warranty. The plaintiff made a motion for summary judgment claiming that under the warranty provisions of the contract of sale the defendant was precluded from recovery for the claimed breach of warranty. The defendant then as&ed leave to amend. In the proposed amendment the defendant alleged that prior to the furnishing of the equipment the plaintiff had furnished engineering service to it and in connection therewith the plaintiff had recommended to the defendant the equipment which was the subject of the sale and that the plaintiff was guilty of negligence in so doing. The trial court denied the motion to amend and sustained the plaintiff’s motion for summary judgment. On appeal both rulings were affirmed. In affirming the ruling of the trial court on the motion of the defendant to amend, the Court stated, at pages 824, 825:

In the recent case of Shafer v. Reo Motors, Inc., 3 Cir., 1953, 205 F.2d 685, the plaintiff, who was the vendee of a motor coach, brought an action to recover damages from his vendor based on negligence. It was the claim of the plaintiff that the defendant was guilty of negligence in connection with the materials used in the gasoline tank of the coach and the supports for that tank. The plaintiff claimed that as a consequence of that negligence the tank dragged on the street and set fire to the coach. The contract of sale, after setting forth the warranty of the vendor, continued as follows, at page 687:

The defendant made a motion for summary judgment based on the above portion of the provision, which motion was sustained by the trial court. On appeal that ruling was sustained. The Court stated, at page 687:

In' a recent case comment on this case in 27 Temple Law Quarterly, 363-366 (1954), it is stated, at page 363:

In the case of Santa Fe, Prescott & Phoenix Railway Company v. Grant Brothers Construction Company, supra, the United States Supreme Court, at page 190 of 228 U.S., at page 479 of 33 S.Ct., in construing the provision there involved to include negligence of the railroad, gave consideration to the fact that if the words exempting the railroad company from “ ‘all risk of loss or damage’ ” and “ ‘no obligation or risk in case of accident or damage’ ” were not held to exempt the railroad company from liability for its own negligence it would

leave those words without application.2 In the present case the first three sentences of the provision in question refer to the warranty given and provide what the defendant is obligated to do in the event the equipment does not comply with the warranty. The fourth sentence contains the following words: “The liability of the Company arising out of the supplying of said apparatus, or its use, whether on warranties or otherwise, shall not in any case exceed the cost of correcting defects in the apparatus *

The defendant asserts that the parties in the first three sentences of the paragraph in question outlined the defendant’s contractual duty in connection with the supplying of the equipment and covered the matter of its contractual liability in connection therewith and that to regard the words in the fourth sentence as not applicable to liability based upon negligence would be to regard them as meaningless and, in effect, read them out of the provision.

The parties have made use of the word “liability” in connection with the “supplying of said apparatus, or its use.” In McElfresh v. Kirkendall, 1873, 36 Iowa 224, at page 226, the Court states:

If the plaintiffs had instituted an action against the defendant based on contract, it would had to have been on the ground that the furnishing of the claimed defective part by the defendant constituted a breach of warranty. If so based, the action would have failed because the defendant by replacing Cubicle No. 2 without cost had fully discharged the liability assumed by it for breach of warranty.

The contract of sale between the defendant and the Iowa Public Service Company gave rise to a relationship wherein the defendant would be under liability to the Iowa Public Service Company in tort if it failed to exercise reasonable care in connection with the supplying of the equipment. The same contract gave rise to the contractual duty on the part of the defendant to'supply equipment which met the warranty contained in the contract and subjected it to liability in contract for failure so to do.

The words in contracts of sale which the courts have held encompassed the liability of the vendor for negligence are frequently found in a provision of the contract which also covers the matter of warranty. Shafer v. Reo Motors, Inc., supra; Charles Lachman Co. v. Hercules Powder Co., supra.

While the matter of whether one party to a contract proceeds against the other party to the contract by an action on contract or by an action in tort' is of legal significance, nevertheless frequently the one action is closely related to the other both factually and legally. In that connection the Court of Appeals of New York, in the case of Busch v. Interborough Rapid Transit Co., 1907, 187 N.Y. 388, 80 N.E. 197, at page 198, 10 Ann. Cas. 460, stated: “The dividing line between breaches of contract and torts is often dim and uncertain.” In the case of Bender v. Candee Smith & Howland Co., Sup.1954, 136 N.Y.S.2d 425, at page 426, the Court stated: “The line between tort and breach of contract may not always be drawn sharply and at times the two may overlap.”

Vendees’ actions on contract against their vendors for breach of warranty are historically related to actions in tort. Greco v. S. S. Kresge Co., 1938, 277 N.Y. 26, 12 N.E.2d 557, 115 A.L.R. 1020. In, that case the Court stated, at page 561. of 12 N.E.2d:

deceit. Ames’ Lectures on Legal History [1913], p. 136. Even today, an action for breach of warranty is, in some respects, an action in tort. Mere breach of contract, generally speaking, is not a tort. Yet the distinction-between torts and breaches of contract is, ofttimes, so dim and shadowy that no clear line of delineation may be observed and no accurate or satisfactory ■ definition of either- may be formulated. ”

The close relationship between the liability of a vendor to his vendee based on warranty and his liability to his vendee based on negligence would tend to lend support to the view of those courts which have regarded words encompassing negligence as being properly contained- in a provision of a contract of sale relating to warranties. See Shafer v. Reo Motors, Inc., supra; Charles Lachman Co. v. Hercules Powder Co., supra.

The question as to whether the provision in question or a somewhat similar provision in an Iowa contract, would or would not encompass a party’s own negligence would come within the scope of the doctrine of the ease Erie Railroad Company v. Tompkins, 1938, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487.

Under the Iowa law the defendant and the Iowa Public Service Company could validly contract to limit the liability of the defendant for negligence in the furnishing of the equipment or to exempt the defendant from liability for negligence in connection therewith. Under the Iowa law the words used by the defendant and the Iowa Public Service Company in the provision in question are to be given their ordinary and usual significance.

It is the conclusion of the Court that giving the words used by the parties in the provision in question their usual and ordinary significance the provision does encompass the defendant’s negligence.

It is the holding of the Court that the responsibility limitation provision in question was a part of the contract of sale between the Iowa Public Service Company and -the defendant and because of that provision the Iowa Public Service Company could not have maintained an action against the defendant based upon its claimed negligence in connection with the manufacturing and inspecting of the equipment supplied by it for use by the Iowa Public Service Company and the plaintiffs as subrogees of the Iowa Public Service cannot now maintain such action.

Because of the holding of the Court on the defendant’s affirmative defense, the issues between the parties as to negligence and contributory negligence are not passed upon.

It is ordered that judgment shall be entered in favor of the defendant.

It is further ordered that under Rule 52(a) of the Federal Rules of Civil Procedure, 28 U.S.C.A., the findings of fact, conclusions of law and order for judgment in the foregoing opinion shall constitute the findings of fact, conclusions of law and order for judgment in this case.