Under
the UCC, can a buyer reject the seller’s tender of a camper van with minor
defects and cancel the sale contract?
Short
Answer
Yes.
The perfect tender rule applies if the seller fails to cure the defects within
a reasonable time.
Holding: The appellate court's decision affirmed.
7/20/1978 * The Ramirezes (Ps) signed a sale contract to buy a new camper for
$14,100 and trade-in their old van for $4,700.
* Since Autosport (D) needed two weeks to have the camper ready, the
contract provided for delivery on or about 8/3/1978. – Ps needed the camper for the summer vacation.
8/3 * Ps went to D to pick up the new camper but several defects were
disclosed (the paint was scratched, the electric and sewer hookups were missing, and the hubcaps were not installed).
* The salesperson advised Ps not to accept it because it was not ready.
8/14 * Ps went to D after receiving a call from a D's salesperson, but the
camper windows were open, and the dining area cushions were soaking wet.
* The D's manager suggested that they take the camper and that D would
replace the cushions later. But Ps rejected the offer.
* The manager agreed to replace the cushion and to call them when
the camper was ready.
9/1 * Ps went to D after receiving a call, but no one talked with them while
they were waiting in the showroom for one and a half hours. Ps left in disgust.
10/5 * Ps went to D with an attorney friend. They rejected the camper and
requested the return of their trade-in van.
Later in October * D sold the trade-in van to an innocent third party.
* D argues that Ps are not entitled to rescission because Ps breached the K by rejecting the tender of the camper with a minor defect.
* The court, however, found that UCC, adopted by N.J. Stat. Ann. § 12A:1-101, retained the perfect tender rule, and, thus, Ps had properly rejected tender of the defective camper.
- Under the perfect tender rule, a buyer can reject goods with any defects, substantial or insubstantial.
* The court also notes that UCC adopts other provisions to ameliorate the harshness of the rule, such as (1) the seller’s unconditional right to cure the defects and (2) the buyer's burden to prove substantial impairments of the value of goods for revocation of acceptance.
(1) Before acceptance, the seller has a right to cure: the buyer's rejection of a defective goods does not automatically terminate the K, but rather the seller has an unconditional right to cure. However, once buyer rejects the goods, the burden shifts to the seller to prove that the defects have been cured within a reasonable time.
(2) After acceptance, the buyer must prove substantial impairments of the value of the goods in order to revoke the acceptance, because the acceptance has created liability in the buyer and the seller needs protection from the buyer taking undue advantage.
(3) If the seller fails to cure defects within a reasonable time, the buyer may cancel (not rescind) the K or get money allowance for the uncured defects.
* Since D failed to meet its burden, Ps may cancel the K and recover the price paid (the trade-in price).
- On 9/1, D did not demonstrate that the defect had been corrected. Thus, P’s request for the trade-in on 10/5 was timely and proper.
- The remedy for a rightful rejection is cancellation, not rescission. Rescission is a remedy for material breach.
* The fair market value of their trade-in is the proper remedy rather than recovery of their trade-in, because it had been sold to an innocent third party.
- The trade-in market is the most appropriate market to measure the value (the market value must be determined by change of hands between willing parties under no compulsion).