A Question of Ethics—Revocation of Acceptance.

Scotwood Industries, Inc., sells calcium chloride flake for use in ice melt products. Between July and September 2004, Scotwood delivered thirty-seven shipments of flake to Frank Miller & Sons, Inc. After each delivery, Scotwood billed Miller, which paid thirty-five of the invoices and processed 30 to 50 percent of the flake. In August, Miller began complaining about the quality. Scotwood assured Miller that it would remedy the situation. Finally, in October, Miller told Scotwood, “This is totally unacceptable. We are willing to discuss Scotwood picking up the material.” Miller claimed that the flake was substantially defective because it was chunked.

Calcium chloride maintains its purity for up to five years, but if it is exposed to and absorbs moisture, it chunks, making it unusable. In response to Scotwood’s suit to collect payment on the unpaid invoices, Miller filed a counterclaim in a federal district court for breach of contract, seeking to recover based on revocation of acceptance, among other things.

[Scotwood Industries, Inc. v. Frank Miller & Sons, Inc., 435 F.Supp.2d 1160 (D.Kan. 2006)] (See page 429.)

1. What is revocation of acceptance? How does a buyer effectively exercise this option? Do the facts in this case support this theory as a ground for Miller to recover damages?

Why or why not?

2. Is there an ethical basis for allowing a buyer to revoke acceptance of goods and recover damages? If so, is there an ethical limit to this right? Discuss.