This important Florida diversity case involves an appeal from a judgment for damages for breach of contract in favor of Eastern Air Lines against McDonnell Douglas Aircraft, Inc. based on a jury verdict in Eastern's favor for the sum of $XX-XXX-XXX.11 plus costs of $241,149.02 one of the largest jury verdicts ever reviewed by this Court. Involved is a series of contracts covering the years 1965-1968 by which Douglas Aircraft, Inc.1 agreed to manufacture and sell to Eastern Air Lines nearly 100 jet planes for approximately a half billion dollars. Suit was filed by Eastern against Douglas on July 3, 1970, based on allegations that 90 of these planes were delivered a total of 7,426 days late. It was not until July 21, 1973, after almost three years of pretrial motions and discovery and four and one-half months of trial, that the jury's verdict was rendered in the District Court.

Our review of the case convinces us that the District Court made a diligent effort to resolve the many difficult matters before it. Nevertheless, we conclude that the trial judge committed substantial and prejudicial errors in a number of his rulings and instructions to the jury, which require reversal of the judgment and a new trial. Accordingly, we reverse and remand.

Eastern Air Lines decided in 1964 to replace what remained of its outmoded propeller-driven fleet in an effort to reverse a serious five-year financial decline. Ever since the advent of the commercial jet age in 1959, Eastern had lagged behind its competitors in the purchase of jet-powered planes. Consequently, the company's decision to order 100 new planes made it the last major trunk carrier to purchase a large number of jet aircraft.

Although Eastern is one of the largest passenger carriers in the world, its route system has historically been composed of relatively short segments. In 1964, only Boeing and Douglas could offer a small, twin-engine, short-range jet suited to Eastern's needs. Eastern's decision to purchase the Douglas DC-9 rather than Boeing's 737 was based in part on Douglas' offer to lease it a number of DC-9-14's as an interim plane until the larger "stretched" DC-9-31's were available.2 Boeing had been unable to provide Eastern with an equivalent aircraft as a substitute for its short-haul, twin-engine 737 which was not due to be delivered until a year after Douglas was to begin producing the DC-9-31. For its longer range flights, Eastern also ordered a number of DC-8-61 jets which are Douglas' equivalent of the Boeing 707.3

Letters of intent providing for Eastern's lease or purchase of DC-9-14's and for its purchase of the "stretched" DC-9-31 and the DC-8 planes were signed in February of 1965. The following July, Douglas and Eastern entered into the first three of what was to be a series of eight contracts providing for the delivery of a total of 99 planes. Five of the eight contracts were amended, some a number of times, between 1965 and 1968.⁴

Although varying in details, all the agreements are basically similar; each required Douglas to manufacture a number of planes at a stipulated price per aircraft to be paid upon the delivery of each plane at Douglas' California plant. Each jet was designated for delivery during a particular calendar month. In addition, every contract contained two provisions which are of special importance to these appeals. One clause is a choice of law provision which requires that the contracts' construction and performance be determined under California law.5 The other provision is an "excusable delay" clause which exempts Douglas from liability for delays beyond its control and not its fault.6

Problems developed in the Douglas-Eastern relationship before even the first plane was scheduled to be delivered. In January 1966, it became evident to both parties that Douglas would be unable to complete its DC-9-14 jets in time to meet the contract delivery dates. In an early exchange of letters on the subject, Douglas attributed the delivery delays to "our nation's rapidly increasing commitments in Southeast Asia," and Eastern replied by expressing concern and noting that "(i)t appears to us that some of this slippage really should have been avoidable."

Subsequently it appeared that the delays could not be confined to the DC-9-14 deliveries. During 1966 and 1967, Douglas repeatedly revised its scheduled delivery of DC-8's and DC-9-31's. These further delays were viewed with "great concern" by Eastern executives who informed Douglas that the late deliveries were imposing a "substantial burden" on the airline.

Throughout this period, Douglas was confronted with a mounting financial crisis which, to some extent, was the result of the DC-8 and DC-9 delivery delays. In the summer of 1966, Douglas forecast a loss of almost $30 million in its operations for the year. By November, Douglas' cash shortage reached such catastrophic proportions that the company's creditors insisted that a solvent merger partner be found. The natural choice was the McDonnell Aircraft Company whose military and space activities effectively complemented Douglas' strength in the commercial aircraft field. After McDonnell infused into Douglas over $68 million in new funds, a merger was consummated on April 28, 1967. The new McDonnell Douglas Corporation assumed all the obligations and liabilities of the former Douglas Aircraft Company.

Delivery delays continued after the merger until the last of the planes was delivered in January 1969. On the average, each of the 90 late planes was delivered 80 days after the month specified in the contract date. Several months after performance had been completed under the last of the eight contracts, Eastern wrote McDonnell on May 29, 1969 presenting a claim for damages resulting from the late deliveries over the previous three years. The airline alleged that these delays could not be deemed excusable under the applicable clause in the agreements. McDonnell rejected the claim and suit was filed in the District Court for the Southern District of Florida.

On the order of the District Judge, the trial was bifurcated with the liability phase to be tried first; to be followed, if necessary, by a trial on damages before the same jury. The greater part of the three-month liability trial was devoted to McDonnell's efforts to prove that the delivery delays were the product of events covered by the excusable delay clause in each contract. Although McDonnell produced evidence that some of the deliveries were late because of strikes and labor shortages, the heart of its defense was that most of the delays were caused by the rapid military buildup occasioned by the war in Vietnam. During the 1966-1968 escalation of the war, the Government asked the aviation industry to accord specific military projects priority over civilian production. Although military priority, in some cases, was gained through written directives and ratings issued pursuant to the Defense Production Act of 1950 ("D.P.A."), the Government often effectively achieved the same result by more informal and less direct means. McDonnell endeavored to show that, because its subcontractors cooperated with this "jawboning" policy of the Government, there were serious delays in the delivery of parts vital to DC-8 and DC-9 production. Throughout the course of this phase of the trial, however, the District Judge took the position that the only excusable delays were those resulting from written government orders issued in strict compliance with procurement regulations. As a result, the trial judge refused to allow the jury to consider evidence of less formal efforts by the Government to expedite military production.

McDonnell Douglas also contended that Eastern had failed to give timely and reasonable notice of the breaches, that one of the contracts was no longer enforceable, and that Eastern should be estopped from pursuing any of its claims. The District Court, however, ruled against McDonnell on all these issues.

At the close of the liability trial, the jury was instructed that McDonnell bore the burden of proving that the delays were caused by events which were excused under the contracts. Furthermore, according to the court's instructions, no event could be an excuse unless it was not reasonably foreseeable at the time the particular contract was entered into. On May 16, 1973, the jury's verdict, in the form of answers to special interrogatories, found that none of the 7,426 days of delay was excusable.

During the six-week damages phase of the trial, each side presented testimony concerning the effect of the delivery delays on Eastern's operations during the 1966-1968 period. Eastern's expert estimated the airline's lost profits to be $XX-XXX-XXX while McDonnell's expert witness was of the opinion that no such damages resulted from the delays. The airline also presented evidence to support its claims for damages resulting from surplus pilot time expense, wasted pilot training and wasted schedule expense. In addition to these claims, the District Judge permitted the jury to consider Eastern's contention that, under Florida law, it was entitled to prejudgment interest from the time of the breach. On July 12, 1973, the jury returned a special verdict awarding Eastern a total of $XX-XXX-XXX in compensatory damages and $9,650,715 in prejudgment interest.⁷

We, the jury award the Plaintiff, EASTERN AIR LINES,

1.  Lost Operating Profit:
            (a) DC-9-14 Aircraft for    (1) 1966         $ 1,360,000
            (b) DC-9-31 Aircraft for    (1) 1966         $       000
                                        (2) 1967         $ 3,145,000
                                        (3) 1968         $ 2,720,000
            (c) DC-8-61 Aircraft for    (1) 1966         $    85,000
                                        (2) 1967         $ 8,075,000
                                        (3) 1968         $ 4,505,000
        2.  Wasted Pilot Training                         $   313,438
        3.  Surplus Pilot Time Expense                    $ 1,816,163
        4.  Wasted Schedule Expense                       $   200,000

INTEREST: To be determined from categories 1(a) (b) (c)
        and 2, 3, and 4 above and 5 below.
        1(a) (1) DC-9-14 Aircraft                        $   561,000
        1(b) (1) DC-9-31 Aircraft                                000
        1(b) (2) DC-9-31 Aircraft                        $ 1,132,200
        1(b) (3) DC-9-31 Aircraft                            816,000
        1(c) (1) DC-8-61 Aircraft                        $    35,062
        1(c) (2) DC-8-61 Aircraft                        $ 2,907,000
        1(c) (3) DC-8-61 Aircraft                        $ 1,351,500
        2.  Wasted Pilot Training                         $   129,291
        3.  Surplus Pilot Time Expense                    $   749,162
        4.  Wasted Schedule Expense                       $    72,000
        5.  Depreciation Reserve                           $1,897,500
                So say we all.
                        Jonathan Gillingham, FOREMAN

Subsequently, on McDonnell's motion for judgment notwithstanding the verdict, the District Judge, on March 26, 1974, filed an opinion holding that prejudgment interest was a matter of California law and therefore could not be awarded by the jury as a matter of right. The court, however, did exercise the discretion available to it under California law in awarding Eastern $2,333,058.11 in prejudgment interest.8 Finally, on June 24, 1974, the District Court denied McDonnell's motion to review the $241,149.02 in costs taxed against it.

In its appeal, McDonnell Douglas' most fundamental contentions concern the District Court's rulings on excusable delay, Eastern's obligation to give reasonable and timely notice of breach, and the enforceability of one of the contracts.

Eastern appeals from the trial judge's determination that the award of prejudgment interest is controlled by California law, arguing that the jury's award of almost $8,000,000 in interest should be reinstated.

A significant preliminary issue concerns the effect to be given Douglas' agreement to lease to Eastern 15 DC-9-14 aircraft until its larger DC-9-31 planes could be delivered.9 On July 9, 1965, Contract 65-41-L, which covered this arrangement, was executed simultaneously with a side letter agreement10 which gave Douglas the option of selling a particular aircraft to a nonuser third party who would assume the financial burden of leasing the plane to Eastern.11 Because of its mounting cash shortage, Douglas exercised this option on all the planes covered by Contract 65-41-L.

Pursuant to the contract and the side agreement, Douglas sold each of the first five DC-9-14's manufactured to several equipment leasing corporations. As each of these jets was delivered between April and July of 1966, Eastern and Douglas executed an amendment to 65-41-L to reflect the fact that the plane was being financed by a third party rather than by Douglas.12 On July 14, however, the Contract 65-41-L was terminated so that the ten DC-9-14's which remained to be manufactured could be financed as a group by Bankers Trust Company. In relevant part, the "Agreement to Terminate" provides:

The Agreement to Lease, as amended . . . is hereby terminated and all obligations, duties and liabilities of the parties thereunder are of no further force and effect, . . . except for any liabilities and obligations which may have accrued thereunder and which may not have been performed or discharged prior to the date hereof.

Simultaneously with the termination of Contract 65-41-L, Douglas executed a contract selling the ten planes to Bankers Trust, and Eastern executed a lease of those planes with the bank.13 Douglas' agreement with Bankers Trust provided for delivery dates which were substantially later than those originally required under Contract 65-41-L.14

The trial judge ruled as a matter of law that Douglas was bound by the original delivery dates specified in Contract 65-41-L for all 15 planes even though seven of them were not scheduled for delivery until after the contract was terminated.15 In the District Judge's view, the above-quoted provision of the termination agreement preserved "any Douglas liability for late deliveries."16 Douglas attacks this ruling as being contrary to the unambiguous language of the termination agreement.17

Under California law, the jurisdiction whose rules control the construction of all the contracts involved in this case,18 to "terminate" a contract "means to abrogate so much of it as remains unperformed, doing away with an existing agreement upon the terms and with the consequences mentioned in the writing . . . ." Sanborn v. Ballanfonte, 1929, 98 Cal.App. 482, 277 P. 152, 155; accord, Grant v. Aerodraulics Co., 1949, 91 Cal.App.2d 68, 204 P.2d 683, 687; Blodgett v. Merritt Annex Oil Co., 1937, 19 Cal.App.2d 169, 65 P.2d 123, 125. Thus, as of July 14, 1966, Contract 65-41-L was no longer binding on Douglas unless the termination agreement specifically continued certain portions of it in effect. See Blodgett v. Merritt Annex Oil Co., supra.

There is no support in the unambiguous, if somewhat awkwardly phrased, language of the "Agreement to Terminate" for the proposition that the original delivery dates were to continue in effect after July 14, 1966. Eastern and Douglas quite explicitly "terminated all . . . obligations . . . and liabilities . . . except for any . . . which may have accrued . . . prior to (July 14, 1966)."19 In the ordinary sense of the word,20 "to accrue" means "to come into existence as an enforceable right."21 Since Douglas was not required to deliver the last seven planes until after July 14, 1966,22 no obligation to deliver these particular aircraft can be deemed to have accrued at the time Contract 65-41-L was terminated.23

Eastern contends, however, that its claims under Contract 65-41-L for the last seven DC-9-14's to be delivered are preserved because Douglas' obligation to deliver in a timely fashion "accrued" when the contract was first executed. If we were to adopt Eastern's view that the accrual of an obligation is the same as its creation, none of the obligations arising under the contract could be deemed terminated despite wording which is explicitly to the contrary. In short, Eastern's proposed construction would render the entire July 14, 1966 "Agreement to Terminate" a nullity.24

Because the termination agreement cannot reasonably be interpreted as preserving the original delivery dates for those planes manufactured after July 14, 1966, the trial judge erred in using the Contract 65-41-L schedule to measure delays in the delivery of the seven DC-9-14's which were not overdue at that time.25 While we recognize that the termination agreement was executed at Douglas' behest in order to help it secure third-party financing, it cannot now be rewritten merely because it operates to Eastern's disadvantage. See Cousins, Inc. v. Hastings Clothing Co., 1941, 45 Cal.App.2d 141, 147, 113 P.2d 878, 881. Courts cannot redraft contracts under the guise of construing them. Hinckley v. Bechtel Corp., 1974, 41 Cal.App.3d 206, 211, 116 Cal.Rptr. 33, 36; see Moss Development Co. v. Geary, 1974, 41 Cal.App.3d 1, 9, 115 Cal.Rptr. 736, 741.26

Having determined that the termination agreement forecloses any action under Contract 65-41-L for delays which occurred after July 14, 1966, we turn to McDonnell's contention that those claims which were preserved by this agreement are barred by the statute of limitations. The limitation period to be applied in this diversity case is that which would be applied by the Florida courts. Wells v. Simonds Abrasive Co., 345 U.S. 514, 73 S.Ct. 856, 97 L.Ed. 1211 (1953); 2 J. Moore, Federal Practice P 3.07(2) at 744-746 (1975). As the trial judge correctly held, Florida's borrowing statute refers us to the applicable statute of limitations imposed by California, the state in which this action arose.27 Under California law, an action for breach of Contract 65-41-L must be brought within four years of the time in which it accrued. Cal.Code Civ.Pro. § 337.28

The District Court held that since Contract 65-41-L was not divisible, the fouryear limitation period did not begin to run until after October 1966, the time originally specified for delivery of the fifteenth and final plane to be manufactured under this agreement.29 McDonnell argues that the agreement was severable because each plane was delivered and paid for separately, and therefore the statute of limitations began to run on each plane as it became overdue. However, because we hold that the July 14, 1966 agreement effectively terminated the contract, we need not decide whether Contract 65-41-L was severable or unitary.

There can be no doubt that Eastern's cause of action under the contract accrued, at the latest, on July 14, 1966 when, for all intents and purposes, performance under Contract 65-41-L ceased. Since this suit was filed more than four years later on July 31, 1970, Eastern's claims arising from the late delivery of the first eight DC-9-14's scheduled to be manufactured under Contract 65-41-L should have been barred by the District Court.

In conclusion, then, the termination agreement and the statute of limitations together preclude Eastern from bringing suit under Contract 65-41-L for delays in the delivery of DC-9-14 aircraft.

III. Notice of Breach Under the Uniform Commercial Code

During the trial and in final instructions to the jury, the District Court held that Eastern need not prove, as a predicate for recovery in this suit, that it had given McDonnell Douglas reasonable and timely notice of the delivery delays. McDonnell strongly contests the trial judge's rulings for Eastern on this issue and argues either that the airline should, as a matter of law, be barred from any recovery or, alternatively, that the issue of timely notice should have been submitted to the jury.

The statute governing this question is section 2-607(3)(a) of the Uniform Commercial Code30 which provides in part as follows:

(3) Where a tender has been accepted

(a) the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy; . . . .

McDonnell contends that the trial judge denied it the benefits of this provision, both by ruling that section 2-607 does not apply to late deliveries and by holding in the alternative that Eastern gave adequate notice. Because we are unable to agree with the District Court's ruling on either ground, we hold that the question of timely notice under section 2-607 should have been submitted to the jury.31

Even though section 2-607, by its very terms, governs "any breach," the trial court found the notice requirement to be inapplicable to delivery delays because a seller necessarily has knowledge of this sort of contract violation. Relying on the case of Jay V. Zimmerman Company v. General Mills, Inc., E.D.Mo., 1971, 327 F.Supp. 1198, 1204, the District Judge concluded that notice is useless where a breach is apparent to both parties.32 The trial court apparently was of the view that the sole function of section 2-607 is to inform the seller of hidden defects in his performance. Under this approach, the only purpose of notice is to provide the seller with an opportunity to remedy an otherwise unknown nonconforming tender. See Reininger v. Eldon Mg. Co., 1952, 114 Cal.App.2d 240, 250 P.2d 4, 8; Chemetron Corporation v. McLouth Steel Corporation, N.D.Ill., 1974, 381 F.Supp. 245, 254.

Section 2-607's origins, however, reveal that it has a much broader function. The Code's notice requirement was derived from decisional law in California33 and several other states which sought to ameliorate the harsh common law rule that acceptance of goods by the buyer waived any and all of his remedies. Franck v. J. J. Sugarman-Rudolph Co., 1952, 40 Cal.2d 81, 251 P.2d 949, 953; Whitfield v. Jessup, 1948, 31 Cal.2d 826, 829, 193 P.2d 1, 2; see 3 S. Williston, Contracts § 714 (rev. ed. 1961). This approach was codified under section 49 of the Uniform Sales Act34 which was adopted in California as Civ.Code § 1769.

As Professor Williston, the author of the Sales Act, has noted, section 49 continued the common law rule treating a seller's tender of goods as an offer of them in full satisfaction. 3 S. Williston, Contracts § 714 (rev. ed. 1961). The buyer, though, was permitted to accept the offer without waiving any claims if he gave the seller prompt notice to this effect. See Reininger v. Eldon Mg. Co., supra, 250 P.2d at 7. This approach reconciled the desire to give finality to transactions in which goods were accepted with the need to accommodate a buyer who, for business reasons, had to accept the tendered goods despite unsatisfactory performance by the seller. Metro Invest. Corp. v. Portland Rd. Lumber Yard, Inc., 1972, 263 Or. 76, 501 P.2d 312, 314. Pre-U.C.C. decisions in California and elsewhere, therefore, recognized that the primary purpose of notice is to inform the seller that, even though his tender has been accepted by the buyer, his performance is nonetheless considered a breach of contract. E. g., Columbia Axle Co. v. American Automobile Ins. Co., 6 Cir., 1933, 63 F.2d 206, 207; Reininger v. Eldon Mg. Co., supra, 250 P.2d at 8.

Under section 49 it was irrelevant whether a seller had actual knowledge of a nonconforming tender. Instead, the critical question was whether the seller had been informed that the buyer considered him to be in breach. Consequently, in Professor Williston's words, "the section is applicable not only to defects in quality but to breach of any promise or warranty, as, for instance, delay in time."35 5 Williston on Contracts § 714 at 409 (3d ed. 1961) (emphasis supplied). Pre-U.C.C. decisions, therefore, applied the notice requirement in delivery delay cases.36 Judge Learned Hand, for example, applied section 49 in a case in which performance had been delayed, noting:

The plaintiff replies that the buyer is not required to give notice of what the seller already knows, but this confuses two quite different things. The notice "of the breach" required is not of the facts, which the seller presumably knows quite as well as, if not better than, the buyer, but of buyer's claim that they constitute a breach. The purpose of the notice is to advise the seller that he must meet a claim for damages, as to which, rightly or wrongly, the law requires that he shall have early warning.

American Mfg. Co. v. United States Shipping Board E. F. Corp., 2 Cir., 1925, 7 F.2d 565, 566; cited with approval Whitfield v. Jessup, supra, 31 Cal.2d at 830, 193 P.2d at 4; Reininger v. Eldon Mg. Co., supra, 250 P.2d at 8. But see Johnson v. Comptoir Franco Belge D'Exportation, etc., 1955, 135 Cal.App.2d 683, 288 P.2d 151, 156.

As the drafters of Article 2 acknowledge, section 2-607 continues the basic policies underlying section 49 of the Uniform Sales Act.37 Indeed, the notice requirement developed in pre-U.C.C. cases is entirely consistent with the Article 2 goals of encouraging compromise and promoting good faith in commercial relations.38 As Comment 4 to section 2-607 indicates, the purpose of notice is not merely to inform the seller that his tender is nonconforming, but to open the way for settlement through negotiation between the parties. In the words of the California Supreme Court, "the sound commercial rule" codified in section 2-607 also requires that a seller be reasonably protected against stale claims arising out of transactions which a buyer has led him to believe were closed. Pollard v. Saxe & Yolles Development Company, 1974, 12 Cal.3d 374, 115 Cal.Rptr. 648, 525 P.2d 88; see Prosser, The Assault upon the Citadel (Strict Liability to the Consumer), 69 Yale L.J. 1099, 1130 (1960). Early warning permits the seller to investigate the claim while the facts are fresh, avoid the defect in the future, minimize his damages, or perhaps assert a timely claim of his own against third parties. See Phillips, Notice of Breach in Sales and Strict Tort Liability Law: Should There Be A Difference?, 47 Ind.L.J. 457, 465-70 (1972); Note, Notice of Breach and the Uniform Commercial Code, 25 U.Fla.L.Rev. 520, 521-25 (1973).

Given these undeniable purposes, it is not enough under section 2-607 that a seller has knowledge of the facts constituting a nonconforming tender; he must also be informed that the buyer considers him to be in breach of the contract. The Code's notice requirement, then, is applicable to delivery delays as well as other breaches.39 MacGregor v. McReki, Inc., 1971, 30 Colo.App. 196, 494 P.2d 1297, 1299; R. Anderson, Uniform Commercial Code § 2-607:13 at 211 (1971); Note, Notice of Breach and the Uniform Commercial Code, 25 U.Fla.L.Rev. 520, 526 (1973); see Warren's Kiddie Shoppe, Inc. v. Casual Slacks, Inc., 1969, 120 Ga.App. 578, 580, 171 S.E.2d 643, 645; Beacon Plastic & Metal Prod. v. Corn Products Co., App.Div.1968, 57 Misc.2d 634, 637, 293 N.Y.S.2d 429, 433. Accordingly, we decline to follow the reasoning of the Zimmerman decision, and we find that the trial court erred in not applying section 2-607 to the delivery delays at issue in this case.

B. Adequate Notice Under Section 2-607(3)(a)

Turning next to the lower court's alternative rationale for ruling against McDonnell on the issue, we must determine whether the notice given by Eastern was both sufficient and timely as a matter of law. Finding the facts "essentially uncontradicted," the trial court concluded that Eastern adequately informed McDonnell that it considered the delivery delays to be an actionable breach:

Eastern's management repeatedly protested the delays and requested negotiation of the dispute, but they were always put off by McDonnell Douglas with the assurance that the matter would be taken up once the assembly line was back on schedule. When production was again on-line many months later it became obvious to Eastern that no good-faith settlement negotiations would take place.40

Because the court's ruling was, in effect, a directed verdict, it can be sustained only if there is no conflict in substantial evidence and the inferences from these facts "point so strongly and overwhelmingly" in favor of Eastern that reasonable men could not have arrived at a contrary verdict. Boeing Company v. Shipman, 5 Cir., 1969, 411 F.2d 365, 374-75 (en banc). As will be demonstrated below, the adequacy and timeliness of notice under section 2-607 typically depend upon the reasonableness of the buyer's efforts to communicate his dissatisfaction. See United States v. Crawford, 5 Cir., 1971, 443 F.2d 611, 614. Therefore, whether the notice requirement has been complied with is a question which is particularly within the province of the jury. See Pritchard v. Liggett & Myers Tobacco Company, 3 Cir., 1961, 295 F.2d 292, 298; L. A. Green Seed Company of Arkansas v. Williams, Ark., 1969, 438 S.W.2d 717; 2 R. Anderson, Uniform Commercial Code § 2-607:24 (1971). As was noted by the Third Circuit:

Where more than one inference may be drawn from undisputed facts, or the facts are disputed, the timeliness and sufficiency of a notice of breach . . . are questions for the jury to resolve. The question of reasonableness must be determined from the circumstances in the individual case.

Pritchard v. Liggett & Myers Tobacco Company, supra (applying Uniform Sales Act); see Columbia Axle Co. v. American Automobile Ins. Co., 6 Cir., 1933, 63 F.2d 206, 208.

Applying this standard of review to the facts, we find that there was at least one substantial factual dispute before the court and that the trial judge's interpretation of the facts in the case was not the only reasonable inference that could be drawn from them. We, therefore, reverse on this issue as well. We do not agree, however, with McDonnell's contention that, as a matter of law, Eastern's notice was inadequate and untimely.

As we have seen, the contractual relationship between Douglas and Eastern stretched over a number of years and was governed by a series of separate agreements, several of which were amended a number of times.41 The complexity of these agreements and the large number of planes involved required the parties to be in constant communication with each other. Indeed, throughout this period, Eastern was informed of all significant developments by one of its own engineers who was in residence at the Douglas plant. Eastern, therefore, often knew of anticipated delivery delays before being formally informed of them by Douglas.

By early January of 1966, both parties were aware that production under Contract 65-41-L, the agreement with the earliest delivery dates, was behind schedule. Douglas did not officially notify Eastern of the impending delays until February when it sent several letters ascribing the DC-9-14 production difficulties to delays by subcontractors and a shortage of skilled labor. In Douglas' view, all of these problems were due to "our nation's rapidly increasing commitments in Southeast Asia." Douglas also indicated that it was making every effort to mitigate the impact of its subcontractors' difficulties.

Eastern replied on March 15, stating that it was "most disappointed with the delivery status" of the DC-9-14's. The airline noted that it had repeatedly expressed concern over the lack of early notification by Douglas. Without contesting Douglas' assertions concerning the Vietnam War, Eastern stated that

It appears to us that some of this slippage really should have been avoidable if corrections had been rigorously pursued when it first became apparent. In light of this, we believe the Douglas Company has a responsibility to assist Eastern wherever possible in the reduction of our own preinauguration activities. Some of the areas that assistance would be beneficial (sic) are training (flight crews, cabin attendants, mechanics, and inspectors) and additional introductory service support.

While it may be too early to evaluate completely, we assume your corrective actions will preserve the presently planned deliveries for the DC-9-31 and the DC-8-61 currently on order by Eastern.

On May 4, Douglas wrote Eastern expressing its willingness to discuss ways of "minimizing the difficulties these delays are causing you." Douglas, however, asked the airline to defer such conversations until production was back on schedule. There was no further correspondence concerning Contract 65-41-L, and, as we have seen, the agreement itself was terminated on July 14, 1966.

By fall of 1966, however, it became apparent that there also would be delays in the delivery of the DC-9-31 and DC-8-61 planes. Between October 1966 and September of 1967, Douglas wrote Eastern at least four times informing the airline of further delays in the production of these two types of aircraft. In a September 28, 1967 letter, written after the April merger, McDonnell Douglas again attributed the delays to "the worker shortage and continuing material and equipment shortages."

Eastern's first formal response to this series of announcements came on October 6, 1967. This letter informed McDonnell that "the delays in aircraft delivery have been very expensive to Eastern Airlines and we must view continuing slippage with great concern." Eastern went on to state that

the delivery delays have cost Eastern so heavily that it would now appear that we made a mistake in going the DC-9 and DC-8-61 routes. Terms that were offered to us by another manufacturer would have been far less costly and although all aircraft manufacturers have suffered to some degree from common problems, it is apparent that the delivery schedule offered to us by your competitors have been more realistic than those attained by Douglas.

The delivery record of your current series of aircraft must necessarily be taken into account as we evaluate the purchase of the next series of airplanes. Unless there is concrete evidence that we can expect the DC-10 to be delivered in accordance with schedules offered by Douglas, it will be very difficult for us to decide in favor of your product as compared with that of another manufacturer.

On November 7, 1968, Eastern's Chief Financial Officer, Mr. Simons, wrote McDonnell Douglas asking that every effort be made to deliver several planes on schedule because a delay during the peak holiday season would place "a substantial burden on Eastern which is more severe than that imposed on your other customers."

There were no further significant written communications from Eastern until May 29, 1969 when McDonnell was formally presented with a claim for damages, in a letter from Eastern reading, in part, as follows:

Eastern has made a full study of such delays and their economic impact and has concluded that Eastern has sustained very substantial damages as a result of delays which cannot be deemed "excusable" within the meaning of the definition in the applicable Purchase Agreements. At its meeting on May 27, 1969, our Board of Directors instructed management to present and process a claim for such damages.

In addition to this undisputed documentary evidence, the District Court had before it testimony concerning Eastern's attitude toward the delivery delays. Eastern's Chairman, Floyd Hall, testified that he "talked with almost every one of the top officials (of Douglas and then of McDonnell Douglas) at one time or another. . . . (E)very time I met them I reminded them of the late delivery of their aircraft." W. Glenn Harlan, Eastern's Senior Vice President of Legal Affairs, also testified that he refused Douglas' request to waive the airline's claims concerning the late deliveries.

The record, however, also contains testimony that Eastern informed McDonnell executives that it did not intend to make a claim for the late deliveries. James S. McDonnell, Chairman of McDonnell Douglas, testified that, as late as October 1968, Eastern's President, Arthur Lewis, assured him that no damages would be sought. Another McDonnell executive, Jackson R. McGowan, also testified that Eastern's Chairman, Floyd Hall, told him that no legal action was contemplated.42 These allegations were denied by Eastern's witnesses.

Eastern contends that these facts are more than sufficient to constitute adequate notice as a matter of law. The Code, in Eastern's view, does not require the buyer to inform the seller that he is presenting a claim under the contract. This contention is based on Comment No. 4 to section 2-607 which states, in part, that "(t)he content of the notification need merely be sufficient to let the seller know that the transaction is still troublesome and must be watched." Eighth Circuit decisions43 and at least one commentary44 have relied on this sentence from Comment No. 4 for the proposition that almost any indication of dissatisfaction on the buyer's part meets the requirements of section 2-607. Under this standard, there would be little doubt that Eastern's letters concerning the delays constituted sufficient notice under the U.C.C.

It appears that Comment No. 4 was aimed at remedying a rule adopted under section 49 of the Uniform Sales Act by some courts that a mere complaint of a breach was not adequate notice.45 In California46 and a number of other states,47 for example, a buyer was required to indicate that he intended to look to the seller for damages. Several jurisdictions, moreover, required the buyer to specify in detail the basis for his claim that the contract was breached. E. g., Idzykowski v. Jordon Marsh Co., 1932, 279 Mass. 163, 181 N.E. 172, 173.

These technical requirements were dispensed with because they frequently served to deny an uninformed consumer of what was otherwise a valid claim.48 As is noted in the draftsmen's comments, "the rule of requiring notification is designed to defeat commercial bad faith, not to deprive a good faith consumer of his remedy."49 Eastern is therefore correct in asserting that notice under section 2-607 need not be a specific claim for damages or an assertion of legal rights. 2 R. Anderson, Uniform Commercial Code § 2-607:25 at 218 (1971).

However, the fact that the Code has eliminated the technical rigors of the notice requirement under the Uniform Sales Act does not require the conclusion that any expression of discontent by a buyer always satisfies section 2-607. As Comment 4 indicates, a buyer's conduct under section 2-607 must satisfy the Code's standard of commercial good faith. Thus, while the buyer must inform the seller that the transaction is "still troublesome," Comment 4 also requires that the notification "be such as informs the seller that the transaction is claimed to involve a breach, and thus opens the way for normal settlement through negotiation."In arguing that these requirements have been complied with, Eastern cannot rely on the same minimal standards of notice developed for ordinary consumers. The measure of good faith required under the Code varies with a buyer's commercial status. Unlike an ordinary purchaser, a merchant's50 good faith is measured by "reasonable commercial standards of fair dealing in the trade."51 Therefore, as the Comments to section 2-607 indicate, what constitutes adequate notice from an inexperienced consumer may not be sufficient in a transaction between professionals.52 While an ordinary purchaser is generally ignorant of his obligation to give timely notice,53 a merchant buyer should be well aware that some form of notice is a requirement of his trade. We find merit, then, in those decisions which have indicated that, under section 2-607, merchants will be held to a higher standard than ordinary buyers. Nugent v. Popular Markets, Inc., 1967, 353 Mass. 45, 59, 228 N.E.2d 91, 94; Ford v. Barnard, Sumner & Putnam Co., Mass.App., 1973, 294 N.E.2d 467, 469; see Note, Notice of Breach and the Uniform Commercial Code, 25 U.Fla.L.Rev. 520, 536-38 (1973).

We note, moreover, that the trial judge's rationale for ruling against McDonnell on the notice issue appears to have been based on a single letter written by Douglas in response to Eastern's March 15, 1966 request for aid in reducing its "pre-inauguration activities." In his post-trial memorandum, the District Judge appeared to infer a waiver of Douglas' right to notification concerning any future breaches from its request that this aid be postponed. In our view, though, the March 15 letter from Eastern does not constitute adequate notice as a matter of law. Indeed, a close reading of the communication reveals that Eastern's primary concern was the lack of early notification of impending delivery delays rather than the validity of Douglas' contention that these delays were the product of the Vietnam War. Although Eastern expressed the view that some of the delays should have been avoided, it requested merely that Douglas help to mitigate the delays' impact upon Eastern's operations. A jury, therefore, might reasonably infer from this correspondence that Eastern was not claiming a breach of the particular contract involved.54

More importantly, the District Court's reliance on these two particular letters evidences a failure to recognize that the buyer's good faith is the governing criterion under section 2-607. As we have seen, the Code's draftsmen disposed of rigid technical requirements which would frustrate the notice requirement's design of defeating commercial bad faith.55 Therefore, the fact that dissatisfaction may once have been communicated to the seller should not preclude an inquiry into the buyer's good faith as evidenced by his entire course of conduct. See United States v. Crawford, supra, 443 F.2d at 614. Even though adequate notice may have been given at one point in the transaction, subsequent actions by the buyer may have dissipated its effect. The buyer's conduct, then, taken as a whole, must constitute timely notification that the transaction is claimed to involve a breach.56

It is particularly important in continuing contractual relationships such as the one which bound Eastern and McDonnell Douglas together for almost four years that all of a buyer's dealings with a seller be evaluated under the good faith standard. An overly mechanical application of the notice requirement to complex or ongoing agreements would frequently frustrate the section 2-607 design of defeating commercial bad faith.

Reviewing Eastern's entire course of conduct during the years 1965-1969, and recognizing that Eastern must be held to a higher standard of good faith than an ordinary consumer, we conclude that a jury could reasonably find, as one of its options, that adequate notice was not given. In analyzing the record before us, we are guided by the Boeing Company v. Shipman, supra, requirement that we give McDonnell the benefit of every reasonable inference.

We note first that even Eastern's most strongly worded communications can reasonably be construed as an effort to prod McDonnell Douglas into minimizing the Vietnam War's impact upon production rather than as a claim for breach. As we have seen, Eastern's March 15, 1966 letter to Douglas perhaps its single most forceful expression of dissatisfaction can be viewed as a request for aid in minimizing the impact of the delays rather than an assertion that Douglas had violated the contract.

Eastern, moreover, did not dispute McDonnell Douglas' contention that the delays were caused by the Vietnam War until the airline presented its formal claim for damages in 1969. Indeed, throughout the life of all the contracts, Eastern was advising its shareholders,57 the public,58 and, in sworn testimony, the Federal Government,59 that war-related defense priorities were causing the delivery delays. Inasmuch as the "excusable delay" clause found in all the contracts provides that the "(s)eller shall not be . . . deemed to be in default" on account of delays caused by "governmental priorities," Eastern may well have led McDonnell to believe that it was not in breach of the agreements.

We disagree with Eastern's contention that it "had no choice but to accept what Douglas was saying as the truth." Eastern was in constant communication with its own engineer who was in residence at the Douglas plant throughout this period.60 Furthermore, Eastern and, indeed, the entire aviation industry were aware that Douglas' catastrophic financial crisis was, to some degree, precipitated by internal management difficulties.61 As early as the summer of 1966, therefore, Eastern had ample opportunity to assert then, as it does now, that the delivery delays were caused by internal problems rather than the Vietnam War. It failed to do so.

Eastern's commercial good faith is subject to further challenge because it continued to negotiate new contracts and amend old ones throughout the period in which the delays occurred. Two of the agreements, in fact, were executed in October of 1967 after 44 of the planes were already late. At no time during the negotiation and execution of any of these contracts did Eastern seek a settlement of its claims or even dispute McDonnell's Vietnam excuse. This may very well have led McDonnell to believe that, even though Eastern was unhappy about the delays, it did not consider them to be a breach of the contract.62

In addition to supporting the inference that adequate notice was not given, the record reveals a conflict in the evidence which, under Boeing Company v. Shipman, supra, is sufficiently substantial to preclude a directed verdict for Eastern. As we have seen, both Mr. McDonnell and Mr. McGowan testified that Eastern's management had assured them that no damages would be sought because of the delivery delays. Eastern's witnesses disputed this contention. If such assurances were in fact given, Eastern's conduct may well have violated the requirements of commercial good faith. This conflict alone, then, is sufficient to render the question of notice an issue for the jury.

The evidence reflected in the record, however, is also insufficient to support a directed verdict in favor of McDonnell Douglas on the issue of notice. There was no evidence at trial concerning the "reasonable standards of fair- dealing" in the commercial aviation industry. We, therefore, cannot determine whether Eastern's conduct failed to satisfy contemporary standards of commercial good faith. Additionally, the conflict in evidence described above, the testimony that Eastern in several instances refused to waive its legal rights,63 and the dissatisfaction with the delays evident in several of the airline's communications with McDonnell, are sufficient to create a jury question. In conclusion, therefore, the issue of notice under U.C.C. § 2-607 should have been submitted to the jury with instructions that it determine whether Eastern's conduct throughout the life of the contracts constituted adequate and timely notice to McDonnell that it was considered to be in breach of the contracts.

IV. The Vietnam War as an Excuse for Delayed Deliveries

Much of the trial below was devoted to McDonnell's defense that the delivery delays were the result of the escalation of the war in Vietnam and were therefore excusable under the contracts, the Defense Production Act, and the Uniform Commercial Code. To prove this contention, McDonnell introduced evidence of government pressure on its suppliers and subcontractors to accord military orders priority over civilian projects. McDonnell asserts that its efforts to raise the defense of government "jawboning" was frustrated by the trial judge's ruling and subsequent instructions to the jury which held that the only excusable delays were those resulting from formal ratings and directives issued in strict compliance with the Defense Production Act. Issue is also taken by McDonnell with the lower court's rulings that it had the burden of proof in establishing its defenses, that the U.C.C. is not applicable to this question and that any excusing event must have been unforeseeable.

Because we find that the Government's "jawboning" policy in effect during the years 1966-1969 comes within the terms of the contracts' excusable delay clause and the exculpatory provision of the Defense Production Act, we hold that the District Judge committed reversible error on this issue. The jury should have been instructed that McDonnell was not liable for any delays proximately caused by this government policy. The trial judge also erred in instructing the jury both that these particular delays had to have been unforeseeable and that the Code's impracticability defense was not available to McDonnell.

Although the origins of American involvement in Vietnam can be traced back to World War II, direct military intervention did not begin on a significant scale until after the overthrow of the Diem Regime in November of 1963. During the ensuing year, the United States increased the number of its troops stationed in that country from 1,000 to 20,300. This American commitment, however, constituted a relatively insignificant part of our total military budget and had no substantial effect on the national economy.64 Even after the Gulf of Tonkin Resolution of August 2, 1964, our troop commitment in Vietnam remained stable with the total size of the army, in fact, declining. The massive American buildup did not begin in earnest until January of 1965,65 and it was not until mid-1966 that the United States assumed the bulk of the combat role in Vietnam.

Thus, in February 1965, when Eastern and Douglas signed the letter of intent concerning all the agreements ultimately executed between them, the Vietnam conflict was having no significant effect on the American economy. There was, moreover, little indication at that time of the proportions which the war was quickly to assume.66

It was not until 1966 that the war first began to have a substantial impact on the American economy. During that year, for example, the armed forces absorbed over two-fifths of the nation's available manpower. A substantial share of the remaining available work force was taken by firms confronted with a rising backlog of defense-related orders. As one expert testified at trial, this military buildup was

superimposed on an economy which was rapidly approaching full employment. . . . Hence there wasn't the available capacity in the American economy to absorb the Vietnam requirements on top of existing civilian requirements.

This, of course, led to conflicts between already scheduled commercial production and sudden, unexpectedly-large military needs. Rather than abandoning entirely the "guns and butter" policy upon which the war had been predicated, the Government sought instead to have military suppliers accord first priority to war production.

The vehicle by which military orders gained precedence over civilian production was the Defense Production Act of 1950 ("D.P.A."). 50 App.U.S.C. § 2061 et seq.67 Section 101 of the D.P.A. grants the President broad authority to require that priority be given to "contracts or orders . . . which he deems necessary or appropriate to promote the national defense."68 Under section 704, the President is authorized further to "make such rules, regulations, and orders as he deems necessary or appropriate to carry out the provisions of this Act."69

As provided under the D.P.A.,70 the President in 1953 delegated his priority powers to the Director of what was then the Office of Emergency Planning ("O.E.P."), a part of the Executive Office of the President.71 Pursuant to this delegation, the O.E.P., in turn, delegated priority authority over the air transport and other industries to the Secretary of Commerce. Within the Commerce Department, the Business and Defense Services Administration ("B.D.S.A.") was charged with administering the Defense Production Act.72

Pursuant to these delegations, the B.D.S.A. adopted rules and regulations governing the precedence to be given certain civilian and military orders.73 The highest priority under these regulations was achieved by "directives" issued by the B.D.S.A. or the Office of Emergency Preparedness to schedule production at a particular plant.74 "DX" ratings were intended to be used "to obtain products and materials in cases of extreme urgency,"75 and were accorded precedence over "DO"-rated orders which, in turn, had priority over all unrated goods in a particular area of production.76

Because of its importance both to the economy and to national defense, production for civil air carriers, ever since the Korean War, had been accorded the same general "DO" priority rating given military aircraft. By having equal preferential status with military production, the manufacturers of commercial planes were guaranteed prior access to the hardware and vital raw materials also being sought by less essential industries.

Occasionally, "DO"-rated civilian orders would delay military requirements with the same priority rating. Prior to 1966, these conflicts were usually resolved by a Defense Department application to the B.D.S.A. for a "bottleneck-breaking DX rating." After a number of weeks, the B.D.S.A. would issue the requested rating if it determined that civilian orders were in fact delaying military production.

By the end of 1965, however, the enormous increase in urgent military orders had made this process so unwieldy that the Defense Department sought to have the "DO" rating removed from commercial aircraft production.77 This request alarmed the entire aviation industry because it would have severely impeded its access to scarce raw materials and the heavy industry which was then processing these materials at full capacity. The airlines themselves were concerned that the loss of "DO" priority would further slow the production of planes already being delayed by a war-caused shortage of jet engines, and that non-urgent military orders would be filled at the expense of pressing commercial needs.

In the face of this widespread opposition, the military withdrew its request that the "DO" rating be removed from commercial aircraft production. As a quid pro quo, however, the Defense Department insisted that particular military orders be given preference on an individual and informal basis. It appears that the aviation industry agreed to the proposed arrangement.78 Official recognition of the new policy is found in a July 22, 1966 letter from Farris Bryant, Director of the Office of Emergency Planning, to the Assistant Secretary of Defense, Paul R. Ignatius:

It is my understanding that, by voluntary agreement between the Department of Defense and the aircraft manufacturers, actions have been taken which permit the manufacturers to produce military orders ahead of all civil air-carrier aircraft although both have equal priority rating.

If this policy has resulted in deliveries which are satisfactory to your Department, it should continue. However, to insure its performance, I am requesting the Secretary of Commerce to use his directive authority wherever necessary to guarantee delivery of military aircraft and associated equipment.79

That same day a copy of this letter was forwarded to the Secretary of Commerce, John T. Conner, with a request that he instruct the B.D.S.A. "to take all necessary actions to insure the prompt delivery of military aircraft." The Secretary of Commerce replied on July 27, 1966, stating thatWith regard to the limitations imposed on the use of priorities, I have directed the Business and Defense Services Administration to take all necessary actions to insure the appropriate administration of the priorities activities in accordance with the policies outlined in your letters to Mr. Ignatius and to us.

Mr. Bryant's letters to Ignatius and Conner were disseminated among the manufacturers and suppliers in the aviation industry, and the policy outlined in them became public knowledge.

That "jawboning" of aircraft manufacturers continued to be the policy of the Executive Branch throughout the period at issue in this case is evident in an August 1, 1969 letter from the Acting Secretary of Commerce, Rocco C. Siciliano, to General G. A. Lincoln, Director of the Office of Emergency Preparedness, which was the successor to the Office of Emergency Planning. In reply to Lincoln's inquiry concerning the aviation industry's request for an extension of its "DO" priority rating, Siciliano noted that his Department had no objection and stated:

It is recommended that any extension of the provisions of the July 22, 1966 letter from the Director of OEP (Bryant) to the Assistant Secretary of Defense (Ignatius) be for a period coterminous with any extension of the Defense Production Act of 1950, as amended; that it be subject to continuing arrangements that will assure deliveries of military needs in advance of civil orders; and that it be subject to termination by the Director of OEP at any time.

As explained by William J. Zepp, the Commerce Department official in charge of the B.D.S.A., the policy approved by Mr. Bryant was that when "DO"-rated orders conflicted, the military came first."80 Individual firms, moreover, were told that any resistance to informal requests by representatives of the military would result in a formal directive being issued against them.81 For example, Pratt & Whitney, the sole supplier of engines to Douglas, was "overwhelmed" in 1966 by government demands that its production of military engines be accelerated.82 These requests were being acceded to, in the words of one Pratt & Whitney executive, "to prevent the removal of the priority rating from the commercial (orders)."

Similar pressures were being applied to the manufacturers of Douglas' landing gear. Gerald Lynch, President and Chairman of Menasco, Inc., testified that the underlying reason for his firm's delay in delivering landing gear to Douglas was "the extraordinary unanticipated requirements for . . . military spares." When questioned by Eastern's counsel concerning why Menasco gave the military priority over Douglas, Lynch replied that

the Douglas program was the most important program in the house. There is no question about that, and it was. After all, Douglas is a continuing customer, would have been a continuing customer through 1972 or '73.

It was to our economic interest to meet the Douglas requirement first and all other requirements second. However, as I pointed out, we were under the power of what I construed to be higher priority items, as far as the military were concerned. I couldn't commit capacity to Douglas ahead, if you will, of military projects. . . . There was just no way for us to do it, as I read the Defense Production Act and the orders.

I am familiar with the Defense Production Act. I was in Washington when the Act was developed. I was there throughout the entire Korean War, and I understood fully the significance of a military order.

There was no question in my mind then, nor is there any question in my mind now, that a military order had preference over any commercial order in the house. Even though it was not to Menasco's economic interest to place military orders ahead of commercial orders, I knew that.

Mr. Kimbrell, you have to understand that we do business with the military on kind of a casual, desultory basis. We do business with the military on spares when they need spares. But the continuing viability of our company depends upon our ability to meet the requirements of the prime contractors, which are Douglas, Lockheed, Grumman, Boeing and the rest of them. . . . (T)here is an overriding consideration that must be acknowledged, and that was the prior treatment that in my opinion, and I think in the opinion of the entire industry, we had to give military orders preferential consideration.

Cleveland Pneumatic Tool Company, the other supplier of landing gear to Douglas also gave military orders priority despite the "DO" rating given its civilian contracts. In response to McDonnell Douglas complaints concerning the delays, the firm sent a telegram on February 2, 1968 stating:

We are attempting to do everything possible to improve our schedule position. However, we are constantly reminded by the military that where commercial work and military work of equal priority conflict, industry has agreed that it will support the military requirement first. We believe that Douglas subscribed to this policy. We have no choice but to adhere to it.

Taking the view that the jawboning policy described above was voluntarily acquiesced in by the aviation industry, the District Court ruled and subsequently instructed the jury during the liability phase of the trial that only delays resulting from the actual issuance of formal ratings or directives could be deemed excusable.83 Consistent with this approach, the trial judge either excluded or struck evidence concerning government jawboning of Douglas' suppliers.

In an effort to blunt McDonnell's attack on the trial judge's rulings and instructions, Eastern devoted a great deal of its briefs and oral argument to a recitation of purported management difficulties at Douglas during the years 1965-1966. Eastern implied that even if the District Court erred in its approach to the Government's jawboning policy, there are no grounds for reversal because the delivery delays were in fact the product of Douglas mismanagement rather than the Vietnam conflict.

Under the Boeing Company v. Shipman standard, however, there is ample evidence in the record to make this issue one for the jury. Not only does it appear that there was a substantial war-caused labor shortage in Douglas' recruiting area,84 but Douglas' suppliers testified that their own delays were the product of similar labor shortages.85 There is also direct evidence indicating that the delivery schedules of the manufacturers of Douglas landing gear86 and engines87 were delayed by the war. In short, the proof indicating that there were at least some war-caused delivery delays is not so inadequate as to eliminate the prejudicial effect of the trial court's rulings on military jawboning.88 We turn, therefore, to an examination of the legal basis for those of the court's rulings and instructions to the jury which related to McDonnell's Vietnam War defense.

McDonnell Douglas contends that the trial judge's instructions to the jury undercut the defense available to it under the excusable delay clause found in all of the contracts at issue in this appeal. In relevant part, the provision reads as follows:

Seller shall not be responsible nor deemed to be in default on account of delays in performance . . . due to causes beyond Seller's control and not occasioned by its fault or negligence, including but not being limited to . . . any act of government, governmental priorities, allocation regulations or orders affecting materials, equipment, facilities or completed aircraft, . . . failure of vendors (due to causes similar to those within the scope of this clause) to perform their contracts . . . , provided such cause is beyond Seller's control.

1. Ejusdem Generis and the Applicability of U.C.C. § 2-615

McDonnell's first contention in this regard is that the District Court unduly narrowed the scope of this clause by instructing the jury that an excusable delay must be the result of "one or more of the listed events in the excusable delay clause of the contracts, or . . . a similar cause beyond the defendant's control. . . . " This instruction, in McDonnell's view, effectively construes the specifically listed excusable causes of delay as restricting the application of the more general phrase which exempts Douglas from liability for delays beyond its control and not due to its negligence. McDonnell feels, therefore, that its affirmative defense was unjustifiably limited to delays caused by events similar to those specifically listed when, in fact, the contracts excused all delays which were not its fault.

The trial judge's construction of the clause, moreover, affords McDonnell Douglas a narrower range of excuses than is available under the modern view of impossibility as it is codified in U.C.C. § 2-615.89 Simply stated, section 2-615 excuses delay or nondelivery when the agreed upon performance has been rendered "commercially impracticable" by an unforeseen supervening event not within the contemplation of the parties at the time the contract was entered into. Uniform Commercial Code § 2-615 (Cal.Comm.Code § 2615) Comments 1 & 8; see Restatement, Contracts §§ 454, 457 (1932); 6 A. Corbin, Contracts §§ 1321, 1339 (1962).

Under section 2-615, the impossibility defense is available to the seller only if he has not "assumed a greater obligation" than that imposed upon him by this provision. During the trial, the court below ruled that section 2-615 was not applicable for this reason. Although the trial judge failed to explain his holding, it must have been based upon his restrictive construction of the excusable delay clause. Presumably, then, the protections of section 2-615 were deemed to have been waived because the contracts were interpreted as limiting McDonnell's impossibility defense to delays caused by events similar to those specifically provided for in the excusable delay clause.

In support of this approach, Eastern argues that the District Court correctly applied ejusdem generis, a canon of judicial construction limiting the application of general terms which follow specific ones to matters similar in kind or classification to those specified. See Bumpus v. United States, 10 Cir., 1963, 325 F.2d 264, 266-67; Ruth v. Pacific Gas & Electric Co., 1972, 23 Cal.App.3d 806, 819, 100 Cal.Rptr. 501, 509. This maxim, however, "is only an instrumentality for ascertaining the correct meaning of words when there is uncertainty." Gooch v. United States, 297 U.S. 124, 128, 56 S.Ct. 395, 397, 80 L.Ed. 522, 526 (1936); accord, City of Los Angeles v. Superior Court, 1934, 2 Cal.2d 138, 39 P.2d 401. Obviously, the application of the doctrine in this case would make superfluous the unambiguous words "including but not being limited to" which precede the specifically listed excuses for delay.90 It is clear, then, that by excusing delays not within McDonnell's control nor due to its negligence, "including but not being limited to" governmental acts, priorities, or orders, the parties intended to excuse all delays coming within the general description regardless of their similarity to the listed excuses. Consequently, there is no basis for the trial judge's conclusion that McDonnell waived the protections of section 2-615 and that its contract excuses are narrower than those available under the doctrine of commercial impracticability.91

McDonnell also challenges the trial judge's jury instruction which limited excusable delivery delays to those resulting from events which were not "reasonably foreseeable" at the time a contract was executed.92 By writing a foreseeability requirement into the excusable delay clause, the District Court appeared to construe the contracts as constituting nothing more than an application of the Code's commercial impracticability rule to those particular events specified in the contracts.⁹³

Although there has been some doubt expressed as to whether the Code permits parties to bargain for exemptions broader than those available under section 2-615, this concern is ill-founded. See Hawkland, The Energy Crisis and Section 2-615 of the Uniform Commercial Code, 79 Com.L.J. 75 (1974). Comment 8 to this provision plainly indicates that parties may "enlarge upon or supplant" section 2-615. See United States v. Wegematic Corp., 2 Cir., 1966,360 F.2d 674, 677 (Friendly, J.).

There appear to be, however, certain strictures imposed upon judicial interpretation of such agreements. Comment 8 provides:

Generally, express agreements as to exemptions designed to enlarge upon or supplant the provisions of this section are to be read in light of mercantile sense and reason, for this section itself sets up the commercial standard for normal and reasonable interpretation and provides a minimum beyond which agreement may not go.

While this provision could have been drafted in less vague terms, we presume that Comment 8 establishes "mercantile sense and reason" as a general standard governing our construction of agreements enlarging upon the protections of section 2-615.94 As we understand Comment 8, where there is doubt concerning the parties' intention, exemption clauses should not be construed as broadening the excuses available under the Code's impracticability rule. Applying this standard to the excusable delay clause, we cannot, in the absence of evidence to the contrary, hold that McDonnell is exempt from liability for any delay, regardless of its foreseeability, that is due to causes beyond its control. Exculpatory provisions which are phrased merely in general terms have long been construed as excusing only unforeseen events which make performance impracticable. Vernon Lumber Corp. v. Harcen Construction, E.D.N.Y., 1945, 60 F.Supp. 555, 558, aff'd on other grounds, 2 Cir., 1946, 155 F.2d 348; see Inter-Coast Steamship Co. v. Seaboard Transportation Co., 1 Cir., 1923, 291 F. 13, 18; 3A A. Corbin, Contracts § 642 (1960); 6 A. Corbin, Contracts § 1342, at 409 (1962). Courts have often held, therefore, that if a promisor desires to broaden the protections available under the excuse doctrine he should provide for the excusing contingencies with particularity and not in general language. See S. L. Jones & Co. v. Bond, 1923, 191 Cal. 551, 217 P. 725; Tomlinson v. Wander Seed & Bulb Co., 1960, 177 Cal.App.2d 462, 2 Cal.Rptr. 310; Beatty v. Oakland Sheet Metal Supply Co., Cal.App.1952, 111 Cal.App.2d 53, 244 P.2d 25; Hawkland, supra, at 76, 79.

We realize, of course, that this rule of construction developed in the pre-U.C.C. era when the scope of the impossibility and frustration doctrines was unclear and varied from jurisdiction to jurisdiction. Because of the uncertainty surrounding the law of excuse, parties had good reason to resort to general contract provisions relieving the promisor of liability for breaches caused by events "beyond his control." Although the Uniform Commercial Code has ostensibly eliminated the need for such clauses, lawyers, either through an abundance of caution or by force of habit, continue to write them into contract. See generally Squillante & Congalton, Force Majeure, 80 Com.L.J. 4, 8-9 (1975). Thus, even though our interpretation would render the general terms of the excusable delay clause merely duplicative of section 2-615, we will adhere to the established rule of construction because it continues to reflect prevailing commercial practices.

We reiterate, however, that we are applying only a canon of contract interpretation which generally reflects commercial standards of reasonableness. We disagree with the suggestion of one commentator that section 2-615 imposes a fixed standard governing the interpretation of exemption clauses.95 The Code establishes no absolute requirement that any agreement purporting to enlarge upon section 2-615 must do so in plain and specific language. Even in the absence of detailed wording, trade usage and the circumstances surrounding a particular agreement may indicate that the parties intended to accord the seller an exemption broader than is available under the U.C.C.96

While we hold that the provision of the excusable delay clause exempting McDonnell from liability for delays beyond its control should be interpreted as incorporating the Code's commercial impracticability doctrine, we disagree with the trial judge's jury instruction on foreseeability insofar as it implies that the events specifically listed in the excusable delay clause in each contract must have been unforeseeable at the time the agreement was executed. The rationale for the doctrine of impracticability is that the circumstance causing the breach has made performance so vitally different from what was anticipated that the contract cannot reasonably be thought to govern. 6 S. Williston, Contracts § 1963 at 5511 (rev. ed. 1938). However, because the purpose of a contract is to place the reasonable risk of performance on the promisor, he is presumed, in the absence of evidence to the contrary, to have agreed to bear any loss occasioned by an event which was foreseeable at the time of contracting. Lloyd v. Murphy, 1944, 25 Cal.2d 48, 54, 153 P.2d 47, 50 (Traynor, J.); see Madeirense Do Brasil S.A. v. Stulman-Emrick Lumber Co., 2 Cir., 1945, 147 F.2d 399, 403; McCulloch v. Liguori, 1948, 88 Cal.App.2d 366, 373, 199 P.2d 25, 30. Underlying this presumption is the view that a promisor can protect himself against foreseeable events by means of an express provision in the agreement.

Therefore, when the promisor has anticipated a particular event by specifically providing for it in a contract, he should be relieved of liability for the occurrence of such event regardless of whether it was foreseeable.97 See Edward Maurer Co. v. Tubeless Tire Co., 6 Cir., 1922, 285 F. 713, 714-15. As Justice Traynor noted for the California Supreme Court under different but nonetheless analogous circumstances,

the question whether a risk was foreseeable is quite distinct from the question whether it was contemplated by the parties. . . . When a risk has been contemplated and voluntarily assumed . . . foreseeability is not an issue and the parties will be held to the bargain they made.

Glenn R. Sewell Sheet Metal, Inc. v. Loverde, 1969, 70 Cal.2d 666, 451 P.2d 721, 728 n. 13; see Lloyd v. Murphy, supra, 153 P.2d at 50. In this case, it is clear that Eastern specifically "contemplated and voluntarily assumed" the risk that deliveries would be delayed by governmental acts, priorities, regulations or orders. Moreover, unlike the only case cited to us by Eastern which construes a similar provision, United States v. Brooks-Callaway Co., 318 U.S. 120, 63 S.Ct. 474, 87 L.Ed. 653 (1943), there is no indication from the wording of the excusable delay clause that McDonnell's defenses are to be limited to breaches caused by unforeseeable events. Therefore, we must conclude that the trial judge erred in instructing the jury that the events specifically listed in the excusable delay clause must have been unforeseeable at the time the contracts were entered into for McDonnell to claim exemption from liability.98

3. Informal Demands for Priority as an "Act of Government"

Turning next to the question of whether the Government's informal priorities policy came within the ambit of the excusable delay clause, we have seen in Part IV-A of this opinion that McDonnell and its suppliers, in granting priority to the military, were cooperating with the established, publicly announced procurement policy of the Federal Government. Eastern contends, however, that this informal program did not come within the scope of the contract clause specifically excusing "any act of government, governmental priorities, allocations, or orders affecting materials." Asserting that the Defense Production Act authorizes the Government to obtain precedence for certain orders only by means of formal, published regulations, Eastern concludes that any other method is illegal, if not unconstitutional, and therefore cannot be deemed an act of Government. We disagree for the following reasons.

The Defense Production Act, in "a sweeping delegation of power,"99 grants the President broad authority to require that defense-related contracts be given precedence over less essential orders. D.P.A. § 101(a), 50 App.U.S.C. § 2071(a).100 Congress created no detailed scheme by which this power was to be exercised, providing only that "(t)he President may make such rules, regulations, and orders as he deems necessary or appropriate." D.P.A. § 704, 50 App.U.S.C. § 2154.101 There is, moreover, nothing in either the legislative history of the D.P.A.102 or in the wording of the Act itself which gives any indication that the Government may not seek compliance with its priorities policies by informal means.103 It is reasonable to conclude, therefore, that Congress intended to accord the Executive Branch great flexibility in molding its priorities policies to the frequently unanticipated exigencies of national defense.

This conclusion is reinforced by the fact that the Defense Production Act of 1950 was enacted in the face of established legal authority which had consistently construed previous procurement statutes as authorizing informal and indirect methods of securing compliance with the Government's military priorities policy. E. g., L. N. Jackson & Co. v. Royal Norwegian Government, 2 Cir., 1949, 177 F.2d 694, cert. denied, 339 U.S. 914, 70 S.Ct. 574, 94 L.Ed. 1340 (1950); Roxford Knitting Co. v. Moore & Tierney, Inc., 2 Cir., 265 F. 177, cert. denied, 253 U.S. 498, 40 S.Ct. 588, 64 L.Ed. 1032 (1920); Dorsey v. Oregon Motor Stages, 1948, 183 Or. 494, 194 P.2d 967; Tidewater Portland Cement Co. v. Lincoln, 1923, 142 Md. 193, 120 A. 365; Nitro Powder Co. v. Agency of Canadian Car & Foundry Co., 1922, 233 N.Y. 294, 135 N.E. 507; Mawhinney v. Millbrook Woolen Mills, Inc., 1921, 231 N.Y. 290, 132 N.E. 93; Tipler-Grossman Lumber Co. v. Forrest City Box Co., 1921, 148 Ark. 132, 229 S.W. 17, 19-20; Pedrick & Springfield, War Measures and Contract Liability, 20 Texas L.Rev. 710, 719 (1942); Dodd, Impossibility of Performance of Contracts Due to War-Time Regulations, 32 Harv.L.Rev. 789, 796-805 (1919); cf. Texas Co. v. Hogarth Shipping Corp., 256 U.S. 619, 41 S.Ct. 612, 65 L.Ed. 1123 (1921). It was recognized that, for reasons of practical necessity, urgently needed government orders had to be obtained "by non-mandatory directions based ultimately on the powers of compulsion rather than by the actual exercise of the statutory compulsive powers." Dodd, Impossibility of Performance of Contracts Due to War-Time Regulations, 32 Harv.L.Rev. 789, 798 (1919). The military's need for speed and flexibility in directing the flow of necessary materials precluded a ponderous bureaucratic procurement process. Thus, even though the World War I National Defense Act, 39 Stat. 213 (June 3, 1916), specifically provided that either the President or a department head placed priorities orders, several decisions held that literal compliance with this requirement was not necessary. Roxford Knitting Co. v. Moore & Tierney, Inc., supra; Mawhinney v. Millbrook Woolen Mills, Inc., supra.

In both Roxford Knitting and Mawhinney, it was asserted that because the government orders were in the form of an ordinary contract and were signed by relatively low-ranking officials, the materials involved were not legally requisitioned, and therefore were obtained merely as the result of a voluntary agreement. The courts, however, permitted the Government wide latitude in its methods of securing precedence for military orders. Applying a pragmatic test to determine whether the transaction conformed with the priorities act, the Roxford Knitting court stated:

And when a manufacturer is given to understand that he is required to supply certain goods to the government of the United States, and is told that he has no option to decline to comply, we are satisfied that as to those goods an "order" has been placed or received, within the spirit and intent and the letter of the statute, whether the authoritative direction is written or oral, and notwithstanding the fact that the parties actually come to an agreement in what has the form of a contract. Substance is not to be sacrificed in such cases to form.

265 F. at 191; accord Mawhinney v. Millbrook Woolen Mills, Inc., supra, 231 N.Y. at 300, 132 N.E. at 96.

During World War II, a similarly liberal view was taken of the Government's procurement authority. See Dorsey v. Oregon Motor Stages, 1948, 183 Or. 494, 194 P.2d 967; Pedrick & Springfield, War Measures and Contract Liability, 20 Texas L.Rev. 710, 719 (1942); Brown, The Effect of Conscription of Industry on Contracts for the Sale of Goods, 90 U.Pa.L.Rev. 533, 546 & n. 82 (1942); cf. Alexewicz v. General Aniline & Film Corp., Sup.Ct.1943, 181 Misc. 181, 43 N.Y.S.2d 713, 723-25. Inasmuch as the D.P.A., in significant respects, contains the language of the World War II statute,104 it is unlikely that there was any intention to redirect, sub silentio, the trend of judicial construction in this area. In fact, the D.P.A. appears to accord the President broader powers than those granted in World War II. Note, The Defense Production Act: Choice as to Allocations, 51 Colum.L.Rev. 350 n. 2 (1951).

There can be little question, then, that the Defense Production Act granted the Government authority to seek compliance with its priorities programs by informal means of persuasion whether written or oral.105 For this reason, many of the decisions relied on by Eastern are inapposite here. E. g. Northern Pacific Ry. v. American Trading Co., 195 U.S. 439, 25 S.Ct. 84, 49 L.Ed. 269 (1904).

We note, moreover, that this case precisely fits an established pattern of decisions rejecting the contention that breaches of contract are excused only by formal or technical acts of Government. Whether predicated on a contractual provision or simply on the common law defense of impossibility these decisions indicate in the clearest terms that fundamentally coercive acts of Government, whatever their form, constitute an excuse for breach. Thus, a promisor is not liable merely because the government order causing a breach is technically deficient. Texas Co. v. Hogarth Shipping Corp., 256 U.S. 619, 41 S.Ct. 612, 65 L.Ed. 1123 (1921). Neither is he required to resist a government requisition in order to be excused from performance. The Claveresk, 2 Cir., 1920, 264 F. 276. As the Claveresk court observed, "it would be 'a strange law' which required . . . (a promisor) to resist, 'till the hand of power was laid upon him, an order which it was his duty to obey'." 264 F. at 280-81. The Supreme Court, moreover, has excused breaches caused by a promisor's anticipation of government action. The Kronprinzessin Cecilie, 244 U.S. 12, 37 S.Ct. 490, 61 L.Ed. 960 (1917). Writing for the Court, Mr. Justice Holmes found the impossibility doctrine applicable to a ship which returned to port in expectation of World War I but before its actual declaration:

(I)t hardly could change . . . (the ship owner's) liability that he prophetically and rightly had anticipated the . . . (war) by twenty-four hours. We are wholly unable to accept the argument that although a shipowner may give up his voyage to avoid capture after war is declared, he never is at liberty to anticipate war.

244 U.S. at 24, 37 S.Ct. at 492, 61 L.Ed. at 966. Thus, the "apprehension of restraint, something much less than actual government compulsion, may suffice to dissolve the obligation of a contract." The Claveresk, supra, 264 F. at 282.

In a similar manner, decisions arising under previous versions of the Defense Production Act have focused upon "the reality of coercion" rather than the form which it may have taken. L. N. Jackson & Co. v. Royal Norwegian Government, supra, 177 F.2d at 699; see Roxford Knitting Co. v. Moore & Tierney, Inc., supra, 265 F. at 191; Dorsey v. Oregon Motor Stages, supra, 194 P.2d at 983; Nitro Powder Co. v. Agency of Canadian Car & Foundry Co., supra, 135 N.E. at 508. Courts have held, therefore, that, where compulsion is actually present, a vendor is justified in complying with a government request for priority, no matter how informally presented or politely phrased that demand may have been. See, e. g., Roxford Knitting Co. v. Moore & Tierney, Inc., N.D.N.Y., 1918, 250 F. 278, 286, aff'd, 2 Cir., 265 F. 177, cert. denied, 253 U.S. 498, 40 S.Ct. 588, 64 L.Ed. 1032; Mawhinney v. Millbrook Woolen Mills, supra, 132 N.E. at 96; 6 A. Corbin, Contracts § 1345 at 425 n. 23 (1962). As one commentator has noted, a court would be

taking an entirely artificial and unrealistic position in holding that a practice deliberately adopted by the executive and enforceable through the exercise of powers granted by the legislature will not be treated by the judiciary as governmental action which private citizens are justified in obeying. The refusal by the courts so to treat it will result, from the standpoint of defendants, in protecting only the unusually cautious and the unusually recalcitrant. . . .

Dodd, Impossibility of Performance of Contracts Due to War-Time Regulations, 32 Harv.L.Rev. 789, 799 (1919).

Eastern contends, however, that these authorities are not applicable here because the B.D.S.A.'s published regulations guaranteed "DO"-rated civilian orders "equal preferential status" with similarly rated military contracts. Regulation 2 § 3(b)(2), 18 Fed.Reg. 1684 (1953). It is Eastern's view that because the Government was violating its own regulations, McDonnell could have successfully resisted its demands.106 The priority enjoyed by commercial aircarrier manufacturers, though, was a privilege granted by the same officials responsible for the informal jawboning policy which prevailed during the Vietnam War. Inasmuch as the program was approved by Bryant who had complete authority to remove the "DO" rating accorded the aviation industry and administered by Zepp who had the power to summarily issue supervening directives and "DX" ratings it would have been futile for McDonnell or its suppliers to resist the Government's demands for priority.107 In short, the preferential status accorded some civilian contracts under the Defense Production Act was