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V. C. Unjustified Non-Performance and the Problem of Forfeiture
  • 1 V. C. 1. The Perfect-Tender Rule and the Doctrine of Substantial Performance

    • 1.1 Oshinsky v. Lorraine Mfg. Co.

      1
      187 F. 120
      2
      OSHINSKY et al.
      v.
      LORRAINE MFG. CO.
      3
      Circuit Court of Appeals, Second Circuit.
      4
      April 11, 1911.
      5
      No. 153.
      6

      [120] Appeal from the Circuit Court of the United States for the Southern District of New York.

      7

      Action at law by the Lorraine Manufacturing Company against Joseph Oshinsky and Samuel Valentine. Judgment (182 Fed. 407) for plaintiff, and defendants appeal. Reversed.

      8

      Adolph Cohen (Arnold Gross, of counsel), for appellants.

      9

      Dorman & Dana (William R. Dorman, of counsel), for appellee.

      10

      Before LACOMBE, WARD, and NOYES, Circuit Judges.

      11
      NOYES, Circuit Judge.
      12

      The question presented for consideration upon this writ of error is a simple one, and the facts upon which it is raised are not involved. The action is on a contract for the manufacture and sale of goods. The complaint alleges that the goods were [121] tendered in accordance with the terms of the contract, but were refused by the defendants. The defendants seeks to justify such refusal upon the ground that the goods were offered after the time specified for delivery in the contract. The contract is in the form of an acceptance of an order for "shirtings," directed by the plaintiff to the defendants, and dated February 4, 1907. The relevant portions are these:

      13

      "Below we hand you copy of your order for spring, 1908, which the mills have accepted, and which they will deliver to you * * * at the specified dates: * * * Stock: Nov. 15."

      14

      It was conceded that several pieces of goods were delivered at dates earlier than November 15th, as specified in the contract, and that the "stock"- a term meaning the balance of the goods covered by the order- was not tendered by the plaintiff to the defendants until November 16th.

      15

      The trial court properly ruled that time was of the essence of the agreement in question- an executory contract for the sale and subsequent delivery of the goods. As said by the Supreme Court in Jones v. United States, 96 U.S. 24, 24 L.Ed. 644:

      16

      "The rule in such a case is that the purchaser is not bound to accept and pay for goods, unless the same are delivered or tendered on the day specified in the contract.

      17

      But the trial court ruled that the contract did not necessarily call for delivery on November 15th; that the provision agreeing to "deliver * * * at the specified dates: * * * Stock: Nov. 15," was ambiguous with respect to time, and that the jury might find that it meant ‘on or about‘ November 15th. In our opinion, this ruling of the trial court was erroneous. We think that the language of the provision is plain, unequivocal, and free from ambiguity, and required delivery on November 15th, and not later. We fail to appreciate the contention of the plaintiff that the language may fairly be given two meanings. A provision for delivery at a specified date, followed by the specification of a date, requires delivery upon that date and none other. The preposition ‘at‘ seems quite as definite and certain as any word that could be used. Consequently, as the goods were not delivered or tendered until after November 15th, we think that the plaintiff failed to establish its cause of action, and that judgment should have been directed for the defendants.

      18

      The judgment of the Circuit Court is reversed.

    • 1.2 Prescott & Co. v. J. B. Powles & Co.

      113 Wash. 177
      Supreme Court of Washington
      Nov. 22, 1920

      1
      PRESCOTT & CO., Limited, Respondent
      2
      v.
      3
      J. B. POWLES & CO., Appellant
      4
       
      5

      No. 16099.

      6

      Nov. 22, 1920.

      7

       

      8

       

      9

      SALES (10,25)—CONTRACTS—ORDER FOR GOODS—ACCEPT ANCE—CONSTRUCTION. In an order for Australian onions taken by a broker, without authority to bind the absent seller, the words “acceptance Australia,” has reference to the seller’s acceptance of the order, and not to the buyer’s acceptance of the goods, especially where the goods were consigned by the seller to itself, retaining title and control.

      10

      SAME (72)—PERFORMANCE OF CONTRACT—PARTIAL DELIVERY—REFUSAL TO ACCEPT, The delivery of goods under an executory contract of sale must be of the exact quantity ordered, or the buyer may refuse to accept them.

      11

      SAME (77)—PARTIAL DELIVERY—EXCUSE FOR DEFAULT. The fact that the United States as a war measure commandeered the only available shipping space necessary for the seller of Australian onions to ship in time the full quantity of onions ordered, does not excuse the seller for his default in delivering the entire quantity, nor render the buyer liable for the part offered, where he refused to accept the same.

      12

      Appeal from a judgment of the superior court for King county, Dykeman, J., entered May 1, 1920, upon findings in favor of the plaintiff, in an action on contract, tried to the court. Reversed.

      13

      James Kiefer, for appellant.

      14

      Byers & Byers, for respondent.

      15
      TOLMAN, J.
      16

      On January 12, 1918, appellant ordered, through a merchandise broker representing the respondent in Seattle, 300 crates of Australian onions. The order reads:

      17

      ‘Sold to J. B. Powles Co. How ship, Boat. When, March. 300 crts. Australian onions, $94 per ton. Cost, freight and insurance Frisco. Acceptance Australia.’

      18

      It appears to [178] have been understood that there was but one ship each month plying between the Australian port of shipment and San Francisco, and that to comply with the order and ship in March the shipment would necessarily be by the steamship Sonoma. About March 12, following, appellant notified the broker of its desire to cancel the order, and caused the broker to cable respondent to that effect; but the cable was not delivered until after the ship had sailed with the partial shipment of onions hereinafter referred to.

      19

      In due time the respondent had ready for shipment the full 300 crates of onions as ordered, but was permitted to load on the ship but 240 crates; the remainder of the space being taken at the last moment by the United States government for the purpose of shipping wheat to the United States. The 240 crates so shipped were consigned to the shipper's order, with directions to notify the buyer, and a draft with bill of lading attached was drawn on the buyer for the purchase price, with the privilege of inspection before payment. Appellant, the buyer, declined to receive the shipment or pay the draft. The goods were sold for its account, and this case was brought to recover the loss occasioned by the resale at a price less than that named in the order, plus the expenses of resale. The case was tried to the court without a jury, resulting in a judgment against appellant for the full amount claimed, from which it appeals.

      20

      A number of troublesome questions are here presented:

      21

      1. Do the words ‘Acceptance Australia’ mean that the order taken by the broker is subject to acceptance by his principal in Australia, or that the purchaser must accept the goods when delivered to the ship in the Australian port? No evidence was offered [179] at the trial as to the trade meaning of the quoted words; but a number of affidavits are included in the statement of facts, all made after the date of the trial below, and evidently used in the argument of the motion for a new trial, some to one effect, and an equal number to the other. We know of no authority which will warrant us in considering these as evidence in the case, and, if we did, they are so evenly balanced as to offset one another. Taking the order as it reads in the light of the fact that it was procured and written by a broker for an absent principal, who, on its receipt, might or might not be able or willing to fill it, we are convinced that it means that the order is taken subject to acceptance by the seller, when it should reach it in Australia.

      22

      ‘The meaning of ‘acceptance’ in the discussion of executory contracts is an assent to enter into a contract according to the terms of the offer.' Williston on Sales, § 482.

      23

      Since the purchaser was present and assented to the order when it was written, no other acceptance of the offer on its part was needed; while as the seller was absent, and could not know of the order or its terms until advised, and the broker is not shown to have had authority to bind it, ‘Acceptance Australia’ must be held to mean that the seller, when advised, might accept or reject the order as conditions should warrant. We are the more convinced that this view is correct, because the seller consigned the goods to itself, and took a bill of lading in its own name, thus maintaining its title and control over the property until the purchaser should, by payment of the draft for the purchase price, come into possession of the indorsed bill of lading and thus acquire title.

      24

      2. It is contended, and generally held, that the delivery of goods under an executory contract must be of the exact quantity ordered, otherwise the buyer may [180] refuse to receive them; and it is not necessary that he base his refusal on this specific ground, but, having refused to accept the goods on other grounds, he may yet defend an action for the purchase price upon this ground. It was so held in Inman, Akers & Inman v. Elk Cotton Mills, 116 Tenn. 141, 92 S. W. 760, where the order was for 50 bales of cotton. The buyer sought to cancel the order, as in this case, and the seller refused to cancel. The buyer then refused to accept the goods, upon the ground that the delivery was not promptly made as the contract required. The seller resold for the account of the buyer, and sued for the loss sustained. It developed during the trial that the seller had tendered delivery of but 49 bales, and the buyer was permitted to amend his answer and defend upon this ground. The court said:

      25

      ‘A delivery of a less number was not a compliance with this contract. So far as it affected the contract relations of the parties, a failure in the matter of one bale was as much as a failure to deliver any greater number of bales. The complainants sue to recover for the breach of an entire contract, and in order to maintain their bill they must show a compliance or a willingness to comply with it as an entirety. Failing in this latter regard, they fail altogether. Tiedeman on Sales,  101; Barker v. Reagan, 4 Heisk. 590. Their insistence that they were relieved from tendering 50 bales by reason of the repudiation of the contract by the defendant, under the facts found by the Court of Chancery Appeals, cannot avail them. If they had accepted the repudiation, or rather cancellation, of the contract contained in the telegram from the defendant, of July 7th, then this failure would not have affected, other matters out of the way, their right to recovery. This, however, they failed to do. They declined positively to accept the cancellation, and thus kept the contract alive between themselves and the defendant, and thus enabled the defendant, notwithstanding its attempted cancellation, to avail itself of [181] any previous or subsequent breach on the part of the complainant.’

      26

      See, also, Sun Publishing Co. v. Minnesota Type Foundry Co., 22 Or. 49, 29 Pac. 6; Barton v. Kane, 17 Wish. 37, 84 Am. Dec. 728; Price v. Engelke, 68 N. J. Law, 567, 53 Atl. 698; Newell v. New Holstein Canning Co., 119 Wis. 635, 97 N. W. 487.

      27

      3. Since the seller did accept the order in Australia and was bound to deliver the exact quantity ordered, may he be excused from making full delivery because our national government (rightfully as we must assume) as a war measure commandeered the only available shipping space for its necessities? Much as the writer would like to so hold, the authorities lay down the contrary rule. Had respondent been sued for damages for failure to ship the full order, this act by the government might have afforded a defense; but, having sued on the contract, it is essential to a recovery that a full performance be shown, and no excuse not provided for in the contract will justify a recovery, where the performance is partial only, save only an act of the buyer rendering performance impossible, or a waiver by it. Newell v. New Holstein Canning Co., supra; Remy v. Olds, 21 L. R. A. 645; The Harriman, 76 U.S. 161, 9 Wall. 161 and cases there cited.

      28

      We conclude that the judgment must be reversed, with directions to dismiss the action. It is so ordered.

      29

      MOUNT, MITCHELL, and MAIN, JJ., concur.

    • 1.3 Ramirez v. Autosport

      1
      88 N.J. 277 (1982)
      2
      440 A.2d 1345
      3
      ERNEST RAMIREZ AND ADELE RAMIREZ, PLAINTIFFS-RESPONDENTS,
      v.
      AUTOSPORT, A CORPORATION OF THE STATE OF NEW JERSEY, DEFENDANT-APPELLANT.
      4

      The Supreme Court of New Jersey.

      5
      Argued December 14, 1981.
      6
      Decided February 4, 1982.
      7

      [281] Leonard Rosenstein argued the cause for appellant (Feuerstein, Sachs & Maitlin, attorneys).

      8

      Leo Kaplowitz argued the cause for respondents (Kaplowitz & Wise, attorneys).

      9
      The opinion of the Court was delivered by POLLOCK, J.
      10

      This case raises several issues under the Uniform Commercial Code ("the Code" and "UCC") concerning whether a buyer may reject a tender of goods with minor defects and whether a seller may cure the defects. We consider also the remedies available to the buyer, including cancellation of the contract. The main issue is whether plaintiffs, Mr. and Mrs. Ramirez, could reject the tender by defendant, Autosport, of a camper van with minor defects and cancel the contract for the purchase of the van.

      11

      The trial court ruled that Mr. and Mrs. Ramirez rightfully rejected the van and awarded them the fair market value of their trade-in van. The Appellate Division affirmed in a brief per curiam decision which, like the trial court opinion, was unreported. We affirm the judgment of the Appellate Division.

      12
      I
      13

      Following a mobile home show at the Meadowlands Sports Complex, Mr. and Mrs. Ramirez visited Autosport's showroom in Somerville. On July 20, 1978 the Ramirezes and Donald Graff, a [282] salesman for Autosport, agreed on the sale of a new camper and the trade-in of the van owned by Mr. and Mrs. Ramirez. Autosport and the Ramirezes signed a simple contract reflecting a $14,100 purchase price for the new van with a $4,700 trade-in allowance for the Ramirez van, which Mr. and Mrs. Ramirez left with Autosport. After further allowance for taxes, title and documentary fees, the net price was $9,902. Because Autosport needed two weeks to prepare the new van, the contract provided for delivery on or about August 3, 1978.

      14

      On that date, Mr. and Mrs. Ramirez returned with their checks to Autosport to pick up the new van. Graff was not there so Mr. White, another salesman, met them. Inspection disclosed several defects in the van. The paint was scratched, both the electric and sewer hookups were missing, and the hubcaps were not installed. White advised the Ramirezes not to accept the camper because it was not ready.

      15

      Mr. and Mrs. Ramirez wanted the van for a summer vacation and called Graff several times. Each time Graff told them it was not ready for delivery. Finally, Graff called to notify them that the camper was ready. On August 14 Mr. and Mrs. Ramirez went to Autosport to accept delivery, but workers were still touching up the outside paint. Also, the camper windows were open, and the dining area cushions were soaking wet. Mr. and Mrs. Ramirez could not use the camper in that condition, but Mr. Leis, Autosport's manager, suggested that they take the van and that Autosport would replace the cushions later. Mrs. Ramirez counteroffered to accept the van if they could withhold $2,000, but Leis agreed to no more than $250, which she refused. Leis then agreed to replace the cushions and to call them when the van was ready.

      16

      On August 15, 1978 Autosport transferred title to the van to Mr. and Mrs. Ramirez, a fact unknown to them until the summer of 1979. Between August 15 and September 1, 1978 Mrs. Ramirez called Graff several times urging him to complete the preparation of the van, but Graff constantly advised her [283] that the van was not ready. He finally informed her that they could pick it up on September 1.

      17

      When Mr. and Mrs. Ramirez went to the showroom on September 1, Graff asked them to wait. And wait they did — for one and a half hours. No one from Autosport came forward to talk with them, and the Ramirezes left in disgust.

      18

      On October 5, 1978 Mr. and Mrs. Ramirez went to Autosport with an attorney friend. Although the parties disagreed on what occurred, the general topic was whether they should proceed with the deal or Autosport should return to the Ramirezes their trade-in van. Mrs. Ramirez claimed they rejected the new van and requested the return of their trade-in. Mr. Lustig, the owner of Autosport, thought, however, that the deal could be salvaged if the parties could agree on the dollar amount of a credit for the Ramirezes. Mr. and Mrs. Ramirez never took possession of the new van and repeated their request for the return of their trade-in. Later in October, however, Autosport sold the trade-in to an innocent third party for $4,995. Autosport claimed that the Ramirez' van had a book value of $3,200 and claimed further that it spent $1,159.62 to repair their van. By subtracting the total of those two figures, $4,159.62, from the $4,995.00 sale price, Autosport claimed a $600-700 profit on the sale.

      19

      On November 20, 1978 the Ramirezes sued Autosport seeking, among other things, rescission of the contract. Autosport counterclaimed for breach of contract.

      20
      II
      21

      Our initial inquiry is whether a consumer may reject defective goods that do not conform to the contract of sale. The basic issue is whether under the UCC, adopted in New Jersey as N.J.S.A. 12A:1-101 et seq., a seller has the duty to deliver goods that conform precisely to the contract. We conclude that the seller is under such a duty to make a "perfect tender" and that a buyer has the right to reject goods that do not conform to the [284] contract. That conclusion, however, does not resolve the entire dispute between buyer and seller. A more complete answer requires a brief statement of the history of the mutual obligations of buyers and sellers of commercial goods.

      22

      In the nineteenth century, sellers were required to deliver goods that complied exactly with the sales agreement. See Filley v. Pope, 115 U.S. 213, 220, 6 S.Ct. 19, 21, 29 L.Ed. 372, 373 (1885) (buyer not obliged to accept otherwise conforming scrap iron shipped to New Orleans from Leith, rather than Glasgow, Scotland, as required by contract); Columbian Iron Works & Dry-Dock Co. v. Douglas, 84 Md. 44, 47, 34 A. 1118, 1120-1121 (1896) (buyer who agreed to purchase steel scrap from United States cruisers not obliged to take any other kind of scrap). That rule, known as the "perfect tender" rule, remained part of the law of sales well into the twentieth century. By the 1920's the doctrine was so entrenched in the law that Judge Learned Hand declared "[t]here is no room in commercial contracts for the doctrine of substantial performance." Mitsubishi Goshi Kaisha v. J. Aron & Co., Inc., 16 F.2d 185, 186 (2 Cir.1926).

      23

      The harshness of the rule led courts to seek to ameliorate its effect and to bring the law of sales in closer harmony with the law of contracts, which allows rescission only for material breaches. LeRoy Dyal Co. v. Allen, 161 F.2d 152, 155 (4 Cir.1947). See 5 Corbin, Contracts § 1104 at 464 (1951); 12 Williston, Contracts § 1455 at 14 (3 ed. 1970). Nevertheless, a variation of the perfect tender rule appeared in the Uniform Sales Act. N.J.S.A. 46:30-75 (purchasers permitted to reject goods or rescind contracts for any breach of warranty); N.J.S.A. 46:30-18 to -21 (warranties extended to include all the seller's obligations to the goods). See Honnold, "Buyer's Right of Rejection, A Study in the Impact of Codification Upon a Commercial Problem", 97 U.Pa.L.Rev. 457, 460 (1949). The chief objection to the continuation of the perfect tender rule was that buyers in a declining market would reject goods for minor nonconformities and force the loss on surprised sellers. See Hawkland, Sales and Bulk Sales Under the Uniform Commercial [285] Code, 120-122 (1958), cited in N.J.S.A. 12A:2-508, New Jersey Study Comment 3.

      24

      To the extent that a buyer can reject goods for any nonconformity, the UCC retains the perfect tender rule. Section 2-106 states that goods conform to a contract "when they are in accordance with the obligations under the contract". N.J.S.A. 12A:2-106. Section 2-601 authorizes a buyer to reject goods if they "or the tender of delivery fail in any respect to conform to the contract". N.J.S.A. 12A:2-601. The Code, however, mitigates the harshness of the perfect tender rule and balances the interests of buyer and seller. See Restatement (Second), Contracts, § 241 comment (b) (1981). The Code achieves that result through its provisions for revocation of acceptance and cure. N.J.S.A. 12A:2-608, 2-508.

      25

      Initially, the rights of the parties vary depending on whether the rejection occurs before or after acceptance of the goods. Before acceptance, the buyer may reject goods for any nonconformity. N.J.S.A. 12A:2-601. Because of the seller's right to cure, however, the buyer's rejection does not necessarily discharge the contract. N.J.S.A. 12A:2-508. Within the time set for performance in the contract, the seller's right to cure is unconditional. Id., subsec. (1); see id., Official Comment 1. Some authorities recommend granting a breaching party a right to cure in all contracts, not merely those for the sale of goods. Restatement (Second), Contracts, ch. 10, especially §§ 237 and 241. Underlying the right to cure in both kinds of contracts is the recognition that parties should be encouraged to communicate with each other and to resolve their own problems. Id., Introduction p. 193.

      26

      The rights of the parties also vary if rejection occurs after the time set for performance. After expiration of that time, the seller has a further reasonable time to cure if he believed reasonably that the goods would be acceptable with or without a money allowance. N.J.S.A. 12A:2-508(2). The determination of what constitutes a further reasonable time depends on the [286] surrounding circumstances, which include the change of position by and the amount of inconvenience to the buyer. N.J.S.A. 12A:2-508, Official Comment 3. Those circumstances also include the length of time needed by the seller to correct the nonconformity and his ability to salvage the goods by resale to others. See Restatement (Second), Contracts, § 241 comment (d). Thus, the Code balances the buyer's right to reject nonconforming goods with a "second chance" for the seller to conform the goods to the contract under certain limited circumstances. N.J.S.A. 12A:2-508, New Jersey Study Comment 1.

      27

      After acceptance, the Code strikes a different balance: the buyer may revoke acceptance only if the nonconformity substantially impairs the value of the goods to him. N.J.S.A. 12A:2-608. See Herbstman v. Eastman Kodak Co., 68 N.J. 1, 9 (1975). See generally, Priest, "Breach and Remedy for the Tender of Non-Conforming Goods under the Uniform Commercial Code: An Economic Approach," 91 Harv.L.Rev. 960, 971-973 (1978). This provision protects the seller from revocation for trivial defects. Herbstman, supra, 68 N.J. at 9. It also prevents the buyer from taking undue advantage of the seller by allowing goods to depreciate and then returning them because of asserted minor defects. See White & Summers, Uniform Commercial Code, § 8-3 at 391 (2 ed. 1980). Because this case involves rejection of goods, we need not decide whether a seller has a right to cure substantial defects that justify revocation of acceptance. See Pavesi v. Ford Motor Co., 155 N.J. Super. 373, 378 (App.Div. 1978) (right to cure after acceptance limited to trivial defects) and White & Summers, supra, § 8-4 at 319 n. 76 (open question as to the relationship between §§ 2-608 and 2-508).

      28

      Other courts agree that the buyer has a right of rejection for any nonconformity, but that the seller has a countervailing right to cure within a reasonable time. Marine Mart Inc. v. Pearce, 252 Ark. 601, 480 S.W.2d 133, 137 (1972). See Intermeat, Inc. v. American Poultry, Inc., 575 F.2d 1017, 1024 (2 Cir.1978); Moulton Cavity & Mold., Inc. v. Lyn-Flex Industries, 396 A.2d 1024, [287] 1027 n. 6 (Me. 1979); Uchitel v. F.R. Tripler & Co., 107 Misc.2d 310, 316, 434 N.Y.S.2d 77, 81 (App.Term 1980); Rutland Music Services, Inc. v. Ford Motor Co., 422 A.2d 248, 249 (Vt. 1980). But see McKenzie v. Alla-Ohio Coals, Inc., 29 U.C.C.Rep. 852, 856-857 (D.D.C. 1979).

      29

      One New Jersey case, Gindy Mfg. Corp. v. Cardinale Trucking Corp., suggests that, because some defects can be cured, they do not justify rejection. 111 N.J. Super. 383, 387 n. 1 (Law Div. 1970). Accord, Adams v. Tremontin, 42 N.J. Super. 313, 325 (App.Div. 1956) (Uniform Sales Act). But see Sudol v. Rudy Papa Motors, 175 N.J. Super. 238, 240-241 (D.Ct. 1980) (§ 2-601 contains perfect tender rule). Nonetheless, we conclude that the perfect tender rule is preserved to the extent of permitting a buyer to reject goods for any defects. Because of the seller's right to cure, rejection does not terminate the contract. Accordingly, we disapprove the suggestion in Gindy that curable defects do not justify rejection.

      30

      A further problem, however, is identifying the remedy available to a buyer who rejects goods with insubstantial defects that the seller fails to cure within a reasonable time. The Code provides expressly that when "the buyer rightfully rejects, then with respect to the goods involved, the buyer may cancel." N.J.S.A. 12A:2-711. "Cancellation" occurs when either party puts an end to the contract for breach by the other. N.J.S.A. 12A:2-106(4). Nonetheless, some confusion exists whether the equitable remedy of rescission survives under the Code. Compare Ventura v. Ford Motor Corp., 173 N.J. Super. 501, 503 (Ch.Div. 1980), aff'd 180 N.J. Super. 45 (App.Div. 1981) (rescission under UCC) and Pavesi v. Ford Motor Corp., supra, 155 N.J. Super. at 377 (equitable remedies still available since not specifically superceded, § 1-103) with Edelstein v. Toyota Motors Dist., 176 N.J. Super. 57, 63-64 (App.Div. 1980) (under UCC rescission is revocation of acceptance) and Sudol v. Rudy Papa Motors, supra, 175 N.J. Super. at 241-242 (under UCC, rescission no longer exists as such).

      31

      [288] The Code eschews the word "rescission" and substitutes the terms "cancellation", "revocation of acceptance", and "rightful rejection". N.J.S.A. 12A:2-106(4); 2-608; and 2-711 & Official Comment 1. Although neither "rejection" nor "revocation of acceptance" is defined in the Code, rejection includes both the buyer's refusal to accept or keep delivered goods and his notification to the seller that he will not keep them. White & Summers, supra, § 8-1 at 293. Revocation of acceptance is like rejection, but occurs after the buyer has accepted the goods. Nonetheless, revocation of acceptance is intended to provide the same relief as rescission of a contract of sale of goods. N.J.S.A. 12A:2-608 Official Comment 1; N.J. Study Comment 2. In brief, revocation is tantamount to rescission. See Herbstman v. Eastman Kodak Co., supra, 68 N.J. at 9; accord, Peckham v. Larsen Chevrolet-Buick-Oldsmobile, Inc., 99 Idaho 675, 677, 587 P.2d 816, 818 (1978) (rescission and revocation of acceptance amount to the same thing). Similarly, subject to the seller's right to cure, a buyer who rightfully rejects goods, like one who revokes his acceptance, may cancel the contract. N.J.S.A. 12A:2-711 & Official Comment 1. We need not resolve the extent to which rescission for reasons other than rejection or revocation of acceptance, e.g. fraud and mistake, survives as a remedy outside the Code. Compare N.J.S.A. 12A:1-103 and White & Summers, supra, § 8-1, p. 295, with N.J.S.A. 12A:2-721. Accordingly, we approve Edelstein and Sudol, which recognize that explicit Code remedies replace rescission, and disapprove Ventura and Pavesi to the extent they suggest the UCC expressly recognizes rescission as a remedy.

      32

      Although the complaint requested rescission of the contract, plaintiffs actually sought not only the end of their contractual obligations, but also restoration to their pre-contractual position. That request incorporated the equitable doctrine of restitution, the purpose of which is to restore plaintiff to as good a position as he occupied before the contract. Corbin, supra, § 1102 at 455. In UCC parlance, plaintiffs' request was for the cancellation [289] of the contract and recovery of the price paid. N.J.S.A. 12A:2-106(4), 2-711.

      33

      General contract law permits rescission only for material breaches, and the Code restates "materiality" in terms of "substantial impairment". See Herbstman v. Eastman Kodak Co., supra, 68 N.J. at 9; id. at 15 (Conford, J., concurring). The Code permits a buyer who rightfully rejects goods to cancel a contract of sale. N.J.S.A. 12A:2-711. Because a buyer may reject goods with insubstantial defects, he also may cancel the contract if those defects remain uncured. Otherwise, a seller's failure to cure minor defects would compel a buyer to accept imperfect goods and collect for any loss caused by the nonconformity. N.J.S.A. 12A:2-714.

      34

      Although the Code permits cancellation by rejection for minor defects, it permits revocation of acceptance only for substantial impairments. That distinction is consistent with other Code provisions that depend on whether the buyer has accepted the goods. Acceptance creates liability in the buyer for the price, N.J.S.A. 12A:2-709(1), and precludes rejection. N.J.S.A. 12A:2-607(2); N.J.S.A. 12A:2-606, New Jersey Study Comment 1. Also, once a buyer accepts goods, he has the burden to prove any defect. N.J.S.A. 12A:2-607(4); White & Summers, supra, § 8-2 at 297. By contrast, where goods are rejected for not conforming to the contract, the burden is on the seller to prove that the nonconformity was corrected. Miron v. Yonkers Raceway, Inc., 400 F.2d 112, 119 (2 Cir.1968).

      35

      Underlying the Code provisions is the recognition of the revolutionary change in business practices in this century. The purchase of goods is no longer a simple transaction in which a buyer purchases individually-made goods from a seller in a face-to-face transaction. Our economy depends on a complex system for the manufacture, distribution, and sale of goods, a system in which manufacturers and consumers rarely meet. Faceless manufacturers mass-produce goods for unknown consumers who purchase those goods from merchants exercising [290] little or no control over the quality of their production. In an age of assembly lines, we are accustomed to cars with scratches, television sets without knobs and other products with all kinds of defects. Buyers no longer expect a "perfect tender". If a merchant sells defective goods, the reasonable expectation of the parties is that the buyer will return those goods and that the seller will repair or replace them.

      36

      Recognizing this commercial reality, the Code permits a seller to cure imperfect tenders. Should the seller fail to cure the defects, whether substantial or not, the balance shifts again in favor of the buyer, who has the right to cancel or seek damages. N.J.S.A. 12A:2-711. In general, economic considerations would induce sellers to cure minor defects. See generally Priest, supra, 91 Harv.L.Rev. 973-974. Assuming the seller does not cure, however, the buyer should be permitted to exercise his remedies under N.J.S.A. 12A:2-711. The Code remedies for consumers are to be liberally construed, and the buyer should have the option of cancelling if the seller does not provide conforming goods. See N.J.S.A. 12A:1-106.

      37

      To summarize, the UCC preserves the perfect tender rule to the extent of permitting a buyer to reject goods for any nonconformity. Nonetheless, that rejection does not automatically terminate the contract. A seller may still effect a cure and preclude unfair rejection and cancellation by the buyer. N.J.S.A. 12A:2-508, Official Comment 2; N.J.S.A. 12A:2-711, Official Comment 1.

      38
      III
      39

      The trial court found that Mr. and Mrs. Ramirez had rejected the van within a reasonable time under N.J.S.A. 12A:2-602. The court found that on August 3, 1978 Autosport's salesman advised the Ramirezes not to accept the van and that on August 14, they rejected delivery and Autosport agreed to replace the cushions. Those findings are supported by substantial credible evidence, and we sustain them. See Rova Farms [291] Resort v. Investors Ins. Co., 65 N.J. 474, 483-484 (1974). Although the trial court did not find whether Autosport cured the defects within a reasonable time, we find that Autosport did not effect a cure. Clearly the van was not ready for delivery during August, 1978 when Mr. and Mrs. Ramirez rejected it, and Autosport had the burden of proving that it had corrected the defects. Although the Ramirezes gave Autosport ample time to correct the defects, Autosport did not demonstrate that the van conformed to the contract on September 1. In fact, on that date, when Mr. and Mrs. Ramirez returned at Autosport's invitation, all they received was discourtesy.

      40

      On the assumption that substantial impairment is necessary only when a purchaser seeks to revoke acceptance under N.J.S.A. 12A:2-608, the trial court correctly refrained from deciding whether the defects substantially impaired the van. The court properly concluded that plaintiffs were entitled to "rescind" — i.e., to "cancel" — the contract.

      41

      Because Autosport had sold the trade-in to an innocent third party, the trial court determined that the Ramirezes were entitled not to the return of the trade-in, but to its fair market value, which the court set at the contract price of $4,700. A buyer who rightfully rejects goods and cancels the contract may, among other possible remedies, recover so much of the purchase price as has been paid. N.J.S.A. 12A:2-711. The Code, however, does not define "pay" and does not require payment to be made in cash.

      42

      A common method of partial payment for vans, cars, boats and other items of personal property is by a "trade-in". When concerned with used vans and the like, the trade-in market is an acceptable, and perhaps the most appropriate, market in which to measure damages. It is the market in which the parties dealt; by their voluntary act they have established the value of the traded-in article. See Frantz Equipment Co. v. Anderson, 37 N.J. 420, 431-432 (1962) (in computing purchaser's damages for alleged breach of uniform conditional sales law, trade-in value [292] of tractor was appropriate measure); accord, California Airmotive Corp. v. Jones, 415 F.2d 554, 556 (6 Cir.1969). In other circumstances, a measure of damages other than the trade-in value might be appropriate. See Chemical Bank v. Miller Yacht Sales, 173 N.J. Super. 90, 103 (App.Div. 1980) (in determining value of security interest in boat, court rejected both book value and contract trade-in value and adopted resale value as appropriate measure of damages).

      43

      The ultimate issue is determining the fair market value of the trade-in. This Court has defined fair market value as "the price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts." In re Estate of Romnes, 79 N.J. 139, 144 (1978). Although the value of the trade-in van as set forth in the sales contract was not the only possible standard, it is an appropriate measure of fair market value.

      44

      For the preceding reasons, we affirm the judgment of the Appellate Division.

      45

      For affirmance — Chief Justice WILENTZ and Justices PASHMAN, CLIFFORD, SCHREIBER, HANDLER, POLLOCK and O'HERN — 7.

      46

      For reversal — None.

    • 1.4 Beck & Pauli Lithographing Co. v. Colorado Milling & Elevator Co.

      1
      52 F. 700
      2
      BECK & PAULI LITHOGRAPHING CO.
      v.
      COLORADO MILLING & ELEVATOR CO.
      3
      Circuit Court of Appeals, Eighth Circuit.
      4
      October 31, 1892.
      5
      No. 141.
      6

      [701] In Error to the Circuit Court of the United States for the District of Colorado. Reversed.

      7
      Statement by SANBORN, Circuit Judge:
      8

      This was an action by the plaintiff in error to recover the contract price of certain stationery and advertising matter furnished the defendant. It was tried on the merits, and at the close of the evidence the court instructed the jury to return a verdict for the defendant, and this instruction is assigned as error. The plaintiff was a corporation of Wisconsin, engaged in lithographing and printing, and its principal place of business was at Milwaukee, in that state. The defendant was a corporation of Colorado, engaged in the business of milling, and its principal place of business was at Denver, in that state. In June, 1889, the plaintiff agreed to make new designs of certain buildings of defendant, with sketches of its trade-marks; to execute engravings thereof in a strictly first-class style; to embody these on the stationery described below; to submit to defendant for approval proofs thereof; to submit designs and proofs of hangers, on fine chromo plate, for advertising defendant's business, by the following fall; to engrave a strictly first-class vignette of one of defendant's plants; to submit a sketch and proof thereof to defendant; to furnish defendant with 10,000 business cards and 5,000 checks in August, 1889; to furnish, in the course of the year, letter heads, noteheads, billheads, statements, bills, envelopes, and cards to the defendant to the number of 331,100, and 5,000 hangers; and to furnish the vignette and 5,000 hangers more after the approval of the proofs thereof by the defendant. The defendant agreed to take and pay for this stationery, this vignette, and these hangers at certain agreed prices, which amounted in the aggregate to about $6,000. The plaintiff furnished the 10,000 cards and 5,000 checks required under the contract in August, 1889, and the defendant received and paid for them. The plaintiff introduced testimony to the effect that it strictly complied with and fully performed these contracts in every respect, except that it shipped the articles contracted for (which were not delivered in August) by rail from Milwaukee to the defendant, at Denver, in December, 1889, in five boxes, four of which did not arrive at Denver until 9:42 A.M., January 1, 1890, and the fifth did not arrive there until January 4, 1890; that before January 8, 1890, all of these articles were tendered to the defendant, and it refused to examine or receive them; that the sketches and proofs of the designs, trade-marks, and hangers had been submitted to and approved by the defendant during the summer and fall of 1889, before these articles were manufactured, and that the last proof was approved November 16, 1889; that on December 16, 1889, the defendant wrote the plaintiff to forward by express 2,000 statements and 3,000 envelopes ‘as per [702] proofs submitted;‘ that the state of the art and process of lithographing is such that, after the general idea of a piece of work is conceived, it is customary to make first a pencil design, and, when this is found satisfactory, to prepare a colored sketch where colored work is required; that after the sketch is colored it is lithographed, that is, transferred to a stone; that each color requires a separate stone; and in these hangers there were nine colors; that it requires from two to three months to reproduce on stone a colored sketch like that used for the hangers; that the artists' work and the reproduction on stone were the most expensive parts of this work contracted for; and that the expense of the materials and printing was but a small part of the entire expense of the work.

      9

      F. W. v. Cotzhausen, for plaintiff in error.

      10

      V. D. Markham, for defendant in error.

      11

      Before CALDWELL and SANBORN, Circuit Judges, and SHIRAS, District Judge.

      12
      SANBORN, Circuit Judge, (after stating the facts.)
      13

      The ground on which it is sought to sustain the instruction of the court below to return a verdict for the defendant in this case is that the plaintiff failed to tender or deliver the articles contracted for to the defendant, at Denver, until six or eight days after the expiration of the year, that the plaintiff did not therefore furnish them ‘in the course of the year,‘ and that this failure justified the defendant in repudiating the contract, and refusing to pay any part of the contract price.

      14

      It is a general principle governing the construction of contracts that stipulations as to the time of their performance are not necessarily of their essence, unless it clearly appears in the given case from the express stipulations of the contract or the nature of its subject-matter that the parties intended performance within the time fixed in the contract to be a condition precedent to its enforcement, and, where the intention of the parties does not so appear, performance shortly after the time limited on the part of either party will not justify a refusal to perform by the party aggrieved, but his only remedy will be an action or counterclaim for the damages he has sustained from the breach of the stipulations. In the application of this principle to the cases as they have arisen, in the promulgation of the rules naturally deduced from it, and in the assignment of the various cases to the respective classes in which the stipulation as to time of performance is, or is not, deemed of the essence of the contract, the controlling consideration has been, and ought to be, to so decide and classify the cases that unjust penalties may not be inflicted, nor unreasonable damages recovered. Thus, in the ordinary contract of merchants for the sale and delivery, or the manufacture and sale, of marketable commodities within a time certain, it has been held that performance within the time is a condition precedent to the enforcement of the contract, and that a failure in this regard would justify the aggrieved party in refusing performance at a later day. Norrington v. Wright, 115 U.S. 188-203, 6 Sup.Ct.Rep. 12. This application of the general principle commends itself as just and reasonable, [703] on account of the frequent and rapid interchange and use of such commodities made necessary by the demands of commerce, and because such goods, if not received in time by the vendee, may usually be sold to others by the vendor at small loss, and thus he may himself measure the damages he ought to suffer from his delay by the difference in the market value of his goods. On the other hand, it has been held that an express stipulation in a contract for the construction of a house, that it should be completed on a day certain, and that, in case of failure to complete it within the time limited, the builder would forfeit $1,000, would not justify the owner of the land on which the house was constructed in refusing to accept it for a breach of this stipulation when the house was completed shortly after the time fixed, nor even in retaining the penalty stipulated in the contract, but that he must perform his part of the contract, and that he could retain from or recover of the builder the damages he sustained by the delay and those only. Tayloe v. Sandiford, 7 Wheat. 13, 17. This application of the general rule is equally just and reasonable. The lumber and material bestowed on a house by a builder become of little comparative value to him, while they are ordinarily of much greater value to the owner of the land on which it stands, and to permit the latter to escape payment because his house is completed a few days later than the contract requires would result in great injustice to the contractor, while the rule adopted fully protects the owner, and does no injustice to any one. The cases just referred to illustrate two well-settled rules of law which have been deduced from this general principle, and in accordance with which this case must be determined. They are:

      15

      In contracts of merchants for the sale and delivery or for the manufacture and sale of marketable commodities a statement descriptive of the subject-matter, or some material incident, such as the time of shipment, is a condition precedent, upon the failure or nonperformance of which the party aggrieved may repudiate the whole contract. Norrington v. Wright, 115 U.S. 188, 203, 6 Sup.Ct.Rep. 12; Rolling Mill v. Rhodes, 121 U.S. 255, 261, 7 Sup.Ct.Rep. 882. But in contracts for work or skill, and the materials upon which it is to be bestowed, a statement fixing the time of performance of the contract is not ordinarily of its essence, and a failure to perform within the time stipulated, followed by substantial performance after a short delay, will not justify the aggrieved party in repudiating the entire contract, but will simply give him his action for damages for the breach of the stipulation. Tayloe v. Sandiford, 7 Wheat. 13, 17; Hambly v. Railroad Co., 21 Fed.Rep. 541, 544, 554, 557.

      16

      It only remains to determine whether the contracts in the case at bar are the ordinary contracts of merchants for the manufacture and sale of marketable commodities or contracts for labor, skill, and materials, and this is not a difficult task. A contract to manufacture and furnish articles for the especial, exclusive, and peculiar use of another, with special features which he requires, and which render them of value to him, but useless and unsalable to others,— articles whose chief cost and value are [704] derived from the labor and skill bestowed upon them, and not from the materials of which they are made,— is a contract for work and labor, and not a contract of sale. Engraving Co. v. Moore, 75 Wis. 170, 172, 43 N.W.Rep. 1124; Goddard v. Binney, 115 Mass. 450; Hinds v. Kellogg, (Com. Pl. N.Y.) 13 N.Y.Supp. 922; Turner v. Mason, (Mich.) 32 N.W.Rep. 846. Thus in Engraving Co. v. Moore, supra, where the lithographing company had contracted to manufacture a large quantity of engravings and lithographs for a theatrical manager, with special features, useful to him only during a certain season, and they were completed and set aside in the rooms of the lithographer, and there burned before delivery to the manager, the court held that the contract was not one for the sale of personal property, but one for work, skill, and materials, because it was not the materials, but the lithographer's work of skill, that gave the value to the finished advertisements, and was the actual subject-matter of the contract, and because that work and skill, while it added the chief value to the finished articles for the especial use of the defendant, made both the articles and the materials worthless for all other purposes.

      17

      The contracts in the case we are considering were not for the blank paper on which they were finally impressed; that was of small value in proportion to the value of the finished articles; they were not for the sale of anything then in existence; they were for the artistic skill and labor of the employes of the defendant in preparing the sketches and designs, transferring them upon stone, and finally impressing them upon the paper the defendant was to furnish; and they authorized the plaintiff, without other orders than the contracts themselves, and the approvals of the designs and proofs there called for, to prepare and furnish all the articles named in the contracts and to collect the contract price therefor. These contracts required the names of defendant's mills and its trademarks to be so impressed upon all these articles that when they were completed they were not only unsalable to all others, but worthless to plaintiff for all purposes but waste paper. The contracts are evidence that on December 31, 1889, the articles contracted for would have been worth about $6,000 to the defendant, and if a few days later, when they were tendered, they were not worth so much, the defendant may recover the damages it suffered from the delay from December 31, 1889, to the date of the tender, in a proper action therefor, or may have the same allowed in this action under proper pleadings and proofs, and no injustice will result; while, if the defendant was permitted on account of this delay to utterly repudiate the contract, the plaintiff must practically lose the entire $6,000. The contracts contain no stipulation from which it can be fairly inferred that the parties intended the time of performance to be even material; indeed, they strongly indicate the contrary. They provide that a certain portion of the articles shall be furnished in two months that the remainder of the stationery and 5,000 hangers shall be furnished in the course of the year, and that 5,000 hangers more and the vignette shall be furnished within a reasonable time after the proofs are approved by the defendant; there is no stipulation for the payment [705] of any damages or the avoidance of the contracts on account of a failure to perform within any of the times stipulated in the contracts, and the parties themselves proceeded so leisurely thereunder that the first and only admitted request by the defendant for the delivery of any of the articles not delivered in August was on December 16, 1889. In Tayloe v. Sandiford, supra, the court refused to permit the owner to retain the $1,000 which the house builder had expressly agreed to pay if he failed to complete the house within the time fixed in the contract. In the absence of any such stipulation, or any clearly-expressed intent that time should be material even, it would be clearly unjustified by the law and inequitable to hold that the plaintiff is compelled to forfeit his entire contract price on account of this trifling delay that may have been immaterial to the defendant, and, if not, may be fully compensated in damages.

      18

      The result is that these contracts were not for the sale and delivery, or the manufacture and delivery, of marketable commodities. They were contracts for artistic skill and labor, and the materials on which they were to be bestowed in the manufacture of articles which were not salable to any one but the defendant when completed because impressed with special features useful only to it. There was nothing in the contracts or their subject-matter indicating any intention of the parties that the stipulations as to time should be deemed of their essence; and the defendant was not justified on account of the slight delay disclosed by the record in refusing to accept the goods, or in repudiating the entire contract. This conclusion disposes of the case, and it is unnecessary to notice other errors assigned. The judgment below is reversed, and the cause remanded for further proceedings not inconsistent with this opinion.

    • 1.5 Bartus v. Riccardi

      1
      55 Misc.2d 3 (1967)
      2
      Frank Bartus, Doing Business as Acousticon of Utica, Plaintiff,
      v.
      Frank Riccardi, Defendant.
      3

      City Court of Utica.

      4
      October 20, 1967
      5

      William D. Ribyat for plaintiff. Vincent J. Vetter for defendant.

      6
      [4] HAROLD H. HYMES, J.
      7

      The plaintiff is a franchised representative of Acousticon, a manufacturer of hearing aids. On January 15, 1966, the defendant signed a contract to purchase a Model A-660 Acousticon hearing aid from the plaintiff. The defendant specified Model A-660 because he had been tested at a hearing aid clinic and had been informed that the best hearing aid for his condition was this Acousticon model. An ear mold was fitted to the defendant and the plaintiff ordered Model A-660 from Acousticon.

      8

      On February 2, 1966, in response to a call from the plaintiff the defendant went to the plaintiff's office for his hearing aid. At that time he was informed that Model A-660 had been modified and improved, and that it was now called Model A-665. This newer model had been delivered by Acousticon for the defendant's use. The defendant denies that he understood this was a different model number. The hearing aid was fitted to the defendant. The defendant complained about the noise, but was assured by the plaintiff that he would get used to it.

      9

      The defendant tried out the new hearing aid for the next few days for a total use of 15 hours. He went back to the hearing clinic, where he was informed that the hearing aid was not the model that he had been advised to buy. On February 8, 1966, he returned to the plaintiff's office complaining that the hearing aid gave him a headache, and that it was not the model he had ordered. He returned the hearing aid to the plaintiff, for which he received a receipt. At that time the plaintiff offered to get Model A-660 for the defendant. The defendant neither consented to nor refused the offer. No mention was made by either party about canceling the contract, and the receipt given [5] by the plaintiff contained no notation or indication that the plaintiff considered the contract cancelled or rescinded.

      10

      The plaintiff immediately informed Acousticon of the defendant's complaint. By letter dated February 14, 1966, Acousticon, writing directly to the defendant, informed him that Model A-665 was an improved version of Model A-660, and that they would either replace the model that had been delivered to him or would obtain Model A-660 for him. He was asked to advise the plaintiff immediately of his decision so that they could effect a prompt exchange. After receiving this letter the defendant decided that he did not want any hearing aid from the plaintiff, and he refused to accept the tender of a replacement, whether it be Model A-665 or A-660.

      11

      The plaintiff is suing for the balance due on the contract. Although he had made a down payment of $80, the defendant made no claim for repayment of his down payment until the case was ready to go to trial. The plaintiff objected to the counterclaim as being untimely. There is nothing in the pleadings to show that such a claim had been previously made by the defendant and, therefore, the court will not consider any counterclaim in this matter.

      12

      The question before the court is whether or not the plaintiff, having delivered a model which admittedly is not in exact conformity with the contract, can nevertheless recover in view of his subsequent tender of the model that did meet the terms of the contract.

      13

      The defendant contends that since there was an improper delivery of goods, the buyer has the right to reject the same under sections 2-601 and 2-602 (subd. [2], par. [c]) of the Uniform Commercial Code. He further contends that, even if the defendant had accepted delivery, he may, under section 2-608 (subd. [1], par. [b]) of the Uniform Commercial Code, revoke his acceptance of the goods because "his acceptance was reasonably induced * * * by the seller's assurances." He also relies on section 2-711, claiming that he may recover not only the down payment but also consequential damages.

      14

      The defendant, however, has neglected to take into account section 2-508 of the Uniform Commercial Code which has added a new dimension to the concept of strict performance. This section permits a seller to cure a nonconforming delivery under certain circumstances. Subdivision (1) of this section enacts into statutory law what had been New York case law. This permits a seller to cure a nonconforming delivery before the expiration of the contract time by notifying the buyer of his intention to so cure and by making a delivery within the [6] contract period. This has long been the accepted rule in New York. (Lowinson v. Newman, 201 App. Div. 266; Portfolio v. Rubin, 196 App. Div. 316.)

      15

      However, subdivision (2) of section 2-508 of the Uniform Commercial Code goes further and extends beyond the contract time the right of the seller to cure a defective performance. Under this provision, even where the contract period has expired and the buyer has rejected a nonconforming tender or has revoked an acceptance, the seller may "substitute a conforming tender" if he had "reasonable grounds to believe" that the nonconforming tender would be accepted and "if he seasonably notifies the buyer" of his intention "to substitute a conforming tender." (51 N. Y. Jur., Sales, p. 41.)

      16

      This in effect extends the contract period beyond the date set forth in the contract itself unless the buyer requires strict performance by including such a clause in the contract.

      17

      "The section [§ 2-508, subd. (2)] rejects the time-honored, and perhaps time-worn notion, that the proper way to assure effective results in commercial transactions is to require strict performance. Under the Code a buyer who insists upon such strict performance must rely on a special term in his agreement or the fact that the seller knows as a commercial matter that strict performance is required." (48 Cornell L. Q. 13; 29 Albany L. Rev. 260.)

      18

      This section seeks to avoid injustice to the seller by reason of a surprise rejection by the buyer. (Official Comment, McKinney's Cons. Laws of N. Y., Book 62½, Uniform Commercial Code, § 2-508.)

      19

      An additional burden, therefore, is placed upon the buyer by this section. "As a result a buyer may learn that even though he rejected or revoked his acceptance within the terms of Sections 2-601 and 2-711, he still may have to allow the seller additional time to meet the terms of the contract by substituting delivery of conforming goods." (3 Bender's Uniform Commercial Code Serv., Sales and Bulk Transfers, § 14-02 [1] [a] [ii].)

      20

      Has the plaintiff in this case complied with the conditions of section 2-508?

      21

      The model delivered to the defendant was a newer and improved version of the model that was actually ordered. Of course, the defendant is entitled to receive the model that he ordered even though it may be an older type. But, under the circumstances, the plaintiff had reasonable grounds to believe that the newer model would be accepted by the defendant.

      22

      The plaintiff acted within a reasonable time to notify the [7] defendant of his tender of a conforming model. (Uniform Commercial Code, § 1-204.) The defendant had not purchased another hearing aid elsewhere. His position had not been altered by reason of the original nonconforming tender.

      23

      The plaintiff made a proper subsequent conforming tender pursuant to subdivision (2) of section 2-508 of the Uniform Commercial Code.

      24

      Judgment is granted to plaintiff.

    • 1.6 U.C.C. § 2-508

    • 1.7 Plante v. Jacobs

      1
      10 Wis.2d 567 (1960)
      2
      PLANTE, Respondent,
      v.
      JACOBS and wife, Appellants.[1]
      3

      Supreme Court of Wisconsin.

      4
      May 4, 1960.
      5
      June 7, 1960.
      6

      [569] For the appellants there were briefs and oral argument by Howard H. Boyle, Jr., of Milwaukee.

      7

      [570] For the respondent there was a brief and oral argument by Richard S. Hippenmeyer of Waukesha.

      8
      HALLOWS, J.
      9

      The defendants argue that the plaintiff cannot recover any amount because he has failed to substantially perform the contract. The plaintiff conceded he failed to furnish the kitchen cabinets, gutters and downspouts, sidewalk, closet clothes poles, and entrance seat amounting to $1,601.95. This amount was allowed to the defendants. The defendants claim some 20 other items of incomplete or faulty performance by the plaintiff and no substantial performance because the cost of completing the house in strict compliance with the plans and specifications would amount to 25 or 30 per cent of the contract price. The defendants especially stress the misplacing of the wall between the living room and the kitchen, which narrowed the living room in excess of one foot. The cost of tearing down this wall and rebuilding it would be approximately $4,000. The record is not clear why and when this wall was misplaced, but the wall is completely built and the house decorated and the defendants are living therein. Real-estate experts testified that the smaller width of the living room would not affect the market price of the house.

      10

      The defendants rely on Manitowoc Steam Boiler Works v. Manitowoc Glue Co. (1903), 120 Wis. 1, 97 N. W. 515, for the proposition that there can be no recovery on the contract as distinguished from quantum meruit unless there is substantial performance. This is undoubtedly the correct rule at common law. For recovery on quantum meruit, see Valentine v. Patrick Warren Construction Co. (1953), 263 Wis. 143, 56 N. W. (2d) 860. The question here is whether there has been substantial performance. The test of what amounts to substantial performance seems to be whether the performance meets the essential purpose of the contract. In the Manitowoc Case the contract called for a boiler having [571] a capacity of 150 per cent of the existing boiler. The court held there was no substantial performance because the boiler furnished had a capacity of only 82 per cent of the old boiler and only approximately one half of the boiler capacity contemplated by the contract. In Houlahan v. Clark (1901), 110 Wis. 43, 85 N. W. 676, the contract provided that the plaintiff was to drive pilings in the lake and place a boathouse thereon parallel and in line with a neighbor's dock. This was not done and the contractor so positioned the boathouse that it was practically useless to the owner. Manthey v. Stock (1907), 133 Wis. 107, 113 N. W. 443, involved a contract to paint a house and to do a good job, including the removal of the old paint where necessary. The plaintiff did not remove the old paint, and blistering and roughness of the new paint resulted. The court held that the plaintiff failed to show substantial performance. The defendants also cite Manning v. School Dist. (1905), 124 Wis. 84, 102 N. W. 356. However, this case involved a contract to install a heating and ventilating plant in the school building which would meet certain tests which the heating apparatus failed to do. The heating plant was practically a total failure to accomplish the purposes of the contract. See also Nees v. Weaver (1936), 222 Wis. 492, 269 N. W. 266 (roof on a garage).

      11

      Substantial performance as applied to construction of a house does not mean that every detail must be in strict compliance with the specifications and the plans. Something less than perfection is the test of specific performance unless all details are made the essence of the contract. This was not done here. There may be situations in which features or details of construction of special or of great personal importance, if not performed, would prevent a finding of substantial performance of the contract. In this case the plan was a stock floor plan. No detailed construction of the house was shown on the plan. There were no blueprints. [572] The specifications were standard printed forms with some modifications and additions written in by the parties. Many of the problems that arose during the construction had to be solved on the basis of practical experience. No mathematical rule relating to the percentage of the price, of cost of completion, or of completeness can be laid down to determine substantial performance of a building contract. Although the defendants received a house with which they are dissatisfied in many respects, the trial court was not in error in finding the contract was substantially performed.

      12

      The next question is, What is the amount of recovery when the plaintiff has substantially, but incompletely, performed? For substantial performance, the plaintiff should recover the contract price less the damages caused the defendant by the incomplete performance. Both parties agree Venzke v. Magdanz (1943), 243 Wis. 155, 9 N. W. (2d) 604, states the correct rule for damages due to faulty construction amounting to such incomplete performance, which is the difference between the value of the house as it stands with faulty and incomplete construction and the value of the house if it had been constructed in strict accordance with the plans and specifications. This is the diminished-value rule. The cost of replacement or repair is not the measure of such damage, but is an element to take into consideration in arriving at value under some circumstances. The cost of replacement or the cost to make whole the omissions may equal or be less than the difference in value in some cases and, likewise, the cost to rectify a defect may greatly exceed the added value to the structure as corrected. The defendants argue that under the Venzke rule their damages are $10,000. The plaintiff on review argues that the defendants' damages are only $650. Both parties agree the trial court applied the wrong rule to the facts.

      13

      The trial court applied the cost-of-repair or replacement rule as to several items, relying on Stern v. Schlafer (1943), [573] 244 Wis. 183, 11 N. W. (2d) 640, 12 N. W. (2d) 678, wherein it was stated that when there are a number of small items of defect or omission which can be remedied without the reconstruction of a substantial part of the building or a great sacrifice of work or material already wrought in the building, the reasonable cost of correcting the defect should be allowed. However, in Mohs v. Quarton (1950), 257 Wis. 544, 44 N. W. (2d) 580, the court held when the separation of defects would lead to confusion, the rule of diminished value could apply to all defects.

      14

      In this case no such confusion arises in separating the defects. The trial court disallowed certain claimed defects because they were not proven. This finding was not against the great weight and clear preponderance of the evidence and will not be disturbed on appeal. Of the remaining defects claimed by the defendants, the court allowed the cost of replacement or repair except as to the misplacement of the living-room wall. Whether a defect should fall under the cost-of-replacement rule or be considered under the diminished-value rule depends upon the nature and magnitude of the defect. This court has not allowed items of such magnitude under the cost-of-repair rule as the trial court did. Viewing the construction of the house as a whole and its cost we cannot say, however, that the trial court was in error in allowing the cost of repairing the plaster cracks in the ceilings, the cost of mud jacking, and repairing the patio floor, and the cost of reconstructing the nonweight-bearing and nonstructural patio wall. Such reconstruction did not involve an unreasonable economic waste.

      15

      The item of misplacing the living-room wall under the facts of this case was clearly under the diminished-value rule. There is no evidence that defendants requested or demanded the replacement of the wall in the place called for by the specifications during the course of construction. To tear down the wall now and rebuild it in its proper place [574] would involve a substantial destruction of the work, if not all of it, which was put into the wall and would cause additional damage to other parts of the house and require replastering and redecorating the walls and ceilings of at least two rooms. Such economic waste is unreasonable and unjustified. The rule of diminished value contemplates the wall is not going to be moved. Expert witnesses for both parties, testifying as to the value of the house, agreed that the misplacement of the wall had no effect on the market price. The trial court properly found that the defendants suffered no legal damage, although the defendants' particular desire for specified room size was not satisfied. For a discussion of these rules of damages for defective or unfinished construction and their application, see Restatement, 1 Contracts, pp. 572, 573, sec. 346 (1) (a), and illustrations.

      16

      On review, the plaintiff raises two questions: Whether he should have been allowed compensation for the disallowed extras, and whether the cost of reconstructing the patio wall was proper. The trial court was not in error in disallowing the claimed extras. None of them was agreed to in writing as provided by the contract, and the evidence is conflicting whether some were in fact extras or that the defendants waived the applicable requirements of the contract. The plaintiff had the burden of proof on these items. The second question raised by the plaintiff has already been disposed of in considering the cost-of-replacement rule.

      17

      It would unduly prolong this opinion to detail and discuss all the disputed items of defects of workmanship or omissions. We have reviewed the entire record and considered the points of law raised and believe the findings are supported by the great weight and clear preponderance of the evidence and the law properly applied to the facts.

      18

      By the Court.—Judgment affirmed.

      19

      [1] Motion for rehearing denied, with $25 costs, on October 4, 1960.

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