Cat Auto Tech. Corp. purchased 10,000 gift certificates from DeJesus. Cat Auto Tech. Corp., an Amoco gasoline station operator, contracted with DeJesus to make 10,000 gift certificates of various denominations, with the Amoco gasoline name and logo on them, stapled together in booklets that included approximately eight gift certificates in each. Delivery was to be within two weeks. Montefiore Hospital had wanted to give these gift certificates to their employees as a Christmas gift.
Michael DiBarro, president of Cat Auto Tech. Corp., stated that the finished product differed from the sample DeJesus had provided in two respects: the paper was different, and the sample contained a decorative border, whereas the finished product did not. Additionally, DiBarro complained that the logo colors were not within the printed borders of the Amoco logo. When the court looked at the certificates, it noted that within a book of gift certificates, two of the eight certificates had colors immediately outside the borders. On one, the problem was slightly noticeable, and on the other, the court could notice the problem only when it inspected closely. DeJesus stated that DiBarro had accepted these minor changes, and that any minor defects were insignificant.
DeJesus delivered the goods to the Cat Auto Tech. Corp. approximately two weeks after the agreed upon delivery date. DiBarro accepted the delivery and paid by check. He did not inspect the certificates at the time of delivery or before he paid. He inspected the certificates a day later, placed a stop payment order on the check without notifying DeJesus, and did not let DeJesus know why he was stopping payment on the check. DeJesus did not know of the stop payment until she eventually received a notice from her bank that she had insufficient funds in her account.
DeJesus wants Cat Auto Tech. Corp. to pay the balance due on the contract, and asks the court to clarify the seller’s right to cure defects in nonconforming goods.
JUDGE LUCINDO SUAREZ … UCC 2-601 provides that “if the goods … fail in any respect to conform to the contract, the buyer may … reject the whole….” … New York subscribe[s] to the perfect tender rule, which allows a buyer to reject goods that fail to conform to the contract. UCC 2-
602(1) provides the manner to accomplish an effective rejection: Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.
An effective rejection requires the buyer to seasonably notify the seller, even though the delivery is of wholly nonconforming goods. In the case at bar delivery was made two weeks after the date called for in the contract. Defendant buyer paid for the goods by check, inspected them the next day and issued a stop payment order on the check. The time to cure a defective tender, if at all, was immediate. The buyer’s notification of its rejection by a stop payment order on its draft was not seasonable, nor within a reasonable time…. Indeed, no reasonable attempt on the part of the buyer to notify the seller was undertaken….
The purpose of notification is to afford the seller the opportunity to cure, or to permit the seller to minimize her losses, such as providing a decrease in the price. This opportunity was never afforded to the seller. The perfect tender rule is limited by the seller’s ability to cure, which is conditioned upon receipt of notice. UCC 2-508 provides: (1) Where … tender … by the seller is rejected because nonconforming and the time for performance has not yet expired, the seller may seasonably notify the buyer of his intention to cure and may then, within the contract time, make a conforming delivery. (2) Where the buyer rejects a nonconforming tender which the seller had reasonable grounds to believe would be acceptable with or without the money allowance, the seller may, if he seasonably notifies the buyer, have a further reasonable time to substitute a conforming tender.
Defendant’s payment for the goods without inspection on the day of delivery, approximately two weeks after the time called for by the contract, effectively waived the performance provisions of the contract regarding the time of delivery…. Therefore, the time within which to perform having expired, subdivision (2)
must be referenced. However, subdivision (2) by implication is only applicable if there has been an effective rejection, which is not the case herein.
Defendant’s payment by check for the goods upon their delivery provided the plaintiff with a measure of reliance that the same would be acceptable.
Defendant’s failure to properly notify plaintiff of the nonconformity effectively prevented plaintiff from an opportunity to cure any defects, within the time limitations of this case, and therefore defendant’s actions cannot be considered to have effectively rejected the goods herein.
Judgment is awarded in favor of plaintiff in the amount of $1,252.00, representing the balance due and owing under the contract with interest from December7, 1993.
Judgment for plaintiff.
CRITICAL THINKING:
In Chapter 1, you learned of the importance of a particular set of facts in determining the outcome of a case. If you could change one fact in this case to make it more likely the judge would rule in favor of Cat Auto Tech. Corp., which fact would you change? Explain.
ETHICAL DECISION MAKING:
Apply the universalization test to the outcome of this case. Does the universalization test support Justice Suarez’s decision?