1. 3L had the option of obtaining cover as a remedy. Why did 3L pursue money damages instead?

2. Suppose that instead of shipping the faulty boards to 3L, Merola shipped a more expensive brand than 3L ordered. How would that impact 3L’s rights as a buyer? 

3L Communications (3L) is a merchant that sells high-end optical telecommunications equipment. Merola does business as NY Telecom Supply (Merola) and is a wholesaler in the telecommunications equipment business. 3L entered into an agreement with Merola for 3L to purchase five optical circuit boards. In accordance with the agreement, Merola shipped the circuit boards via Federal Express, with the balance of $35,090 due on delivery in the form of a cashier’s check. The circuit boards arrived at 3L’s office and were paid for as agreed. However, upon inspection of the circuit boards, 3L discovered that the boards were damaged and were not as Merola had described. 3L immediately contacted Merola and notified her that the boards were unusable and that 3L was returning them. In response, Merola provided shipping instructions and an account number to be used for returning the goods. 3L followed the shipping instructions and the boards were returned to Merola’s address. Two weeks later, 3L sent an e-mail message to Merola regard-ing the refund for the boards. Merola responded that she had not received the returned boards. 3L then supplied Merola with tracking information from the carrier that indicated that the boards had been delivered two weeks earlier. Despite Merola’s insistence that she had not received the boards, detailed records from the carrier indicated that the goods were, in fact, delivered. After Merola stopped responding to 3L inquiries, 3L filed suit to recover its $35,090 payment. Merola filed a counterclaim, arguing that 3L had the risk of loss for the returned boards. The trial court held in favor of 3L finding that risk remained with Merola. She appealed.

The Court of Appeals of Tennessee affirmed the trial court’s decision on the issue of risk of loss. The court ruled in favor of 3L reasoning that the evidence indicated that 3L discovered certain problems and seasonably notified Merola of the problems and ultimately rejected all of the boards as nonconforming with the parties’ agreement. Because 3L could not resell the boards, the only alternative was to return the goods and demand a refund. The court rejected Merola’s claim that the risk passed to 3L on the original delivery. It was clear that the goods were nonconforming and, according to the state’s UCC provisions, the risk stays with the seller in the case of proper rejection of nonconforming goods. 

“[I]t is undisputed that the boards at issue here did not conform to [Merola’s] representation that they had been tested and were in good condition. Rather, [3L] discovered that the boards had been repaired with ‘jumper repairs,’ and that at least one of the boards did not have a serial number. It is undisputed that [3L] was unable to sell the product to its customer. From the record, we cannot conclude that the boards conformed to the agreement between the parties  .  .  . Based upon the facts of this case, we [affirm] the trial court’s determination that the [UCC] applies to this transaction [and] that the risk of loss remained with Ms. Merola.”