Risk of Loss
Buyer's Remedies for Seller's Default II
If there has been an improper or non-conforming tender, the buyer may accept or reject the tender. As we saw in the last page, acceptance of such a tender requires the accepting party to pay for it, and provides very few remedies if the buyer is subsequently dissatisfied. 2-607(3) is directly on point here. When a tender has been accepted, the buyer must notify the seller within a "reasonable" time after discovering a breach or "be barred from any remedy (2-607(3)(a))." The only remedy remaining to the buyer is the route of revocation of acceptance (2-608). Note that once the buyer has accepted the good(s), the burden of proof switches, so that the "burden is now on the buyer to establish any breach with respect to any goods accepted (2-607(4))."
Revocation of acceptance is available under two circumstances. The buyer may revoke acceptance: (1) on the reasonable assumption that a non-conformity would be cured and it has not been cured, or (2) when the non-conformity was difficult to discover at the point of sale or acceptance. The language of the latter, however, gives me some pause. It says that the buyer has this option if s/he was "reasonably induced" by the "difficulty of discovery (2-608(1)(b))." This seems to suggest not simply that the item that "went bad" or was difficult to check out before the sale but that somehow that difficulty itself induced the purchase. Not clear exactly what that means, really, but the courts have generally given a liberal reading of the clause...even at times nullifying a vehicle sale for lack of a spare tire (though, in that case, the tire was a specially-made item that would be difficult to obtain). Comment 2 helps interpret these provisions by saying that "revocation of acceptance is possible only where the non-conformity substantially impairs the value of the goods to the buyer." The two prongs of hiddenness of defect and substantial impairment are important in revocation of acceptance analysis.
The Jorgensen case from Oregon (p. 447) explores the world of revocation even though the court used the language of rescission to describe the transaction. Two points of special importance in this case are the subjective/objective test used to determine the impairment of value to the buyer and the propriety, in some instances, of permitting use of the good after revocation (rescission in this case) because use was compatible with preservation of value of the good.
Finally, we examined the notion of the installment contract (2-612) and the concept of cure. Beginning with the latter first, we said that the seller has a right to cure if the good is delivered within the contract time and is non-conforming. However, the cured good must be delivered within the original period for contract performance (2-508(1)). The only circumstances were cure is of right beyond the contracted time for performance is when the seller tenders a non-conforming good the seller reasonably thinks the buyer would accept (2-508(2)). Comment 2 is helpful in telling us that this is to protect the seller from a "surprise rejection" by the buyer. In this case the seller has an additional "reasonable time" beyond the original contract performance date to substitute a conforming tender. Comment 3 tells us that this depends on the attending circumstances.
The Midwest Mobile (p. 406) case helped explore the intricacies of installment contracts, 2-612. Important for your analysis of the case, for the quiz question, would have been to state at the outset that the court had to decide whether 2-601 or 2-612 applied to this transaction. Because 2-612 authorizes delivery of goods in separate lots to be separately accepted, the court needed to look to 2-105 for a definition of "lot" and "commercial unit" before deciding that 2-612 applied because the contract had in view a delivery of items in lots--separate groups at different times.
The court then held that the seller did have a right to cure, but that right to cure is not found in 2-508 but was implicit in 2-612. The first crucial question was whether the December 13 delivery, even with the cure, "substantially impair[ed]" the value of that installment. 2-612(2). It did in several ways, not least of which were safety and aesthetic problems. The second crucial question, then, was whether the non-conformity in one installment "substantially impair[ed]" the value of the whole contract. This is the 2-612(3) analysis. The court concluded that the impairment of one of the four installments would have a substantial negative impact on Midwest. I think that one of the factors leading to the court's conclusion was that the Dec. 13 letter from Pike to Kanaan stated that the design was the best they could come up with and that he didn't know if anything different could be done. The Dec. 14 letter, which tried to soften the langauge of the Dec. 13 letter, did not provide specific enough assurances to convince the court that any further time to cure was necessary. Thus, Midwest was awarded all damages it sought.