Opinion ID: 196480
Heading Depth: 2
Heading Rank: 2

Heading: Revocation and Rejection Remedies

Text: 52 Even if liability is based only on counts 3 and 4, Knapp argues on appeal that the magistrate judge nevertheless erred in determining the remedies available to it. It says that he improperly denied to Knapp remedies of revocation of acceptance (with respect to all prior shipments) and rejection (with respect to the shipment of February 1990) and that these errors led him into a further error, namely, to direct his damage assessment only to those shoes actually shown to be defective. 53 Revocation of Acceptance as to All Shoes. Knapp first argues that it is entitled to revoke acceptance of all inventory purchased from Sylvania--including non-defective shoes--because the rate of defects was so high as to make it impossible for Knapp to sell shoes from that inventory. The magistrate judge rejected this remedy because he found a very low rate of defects. Although this finding is not adequately supported, see IV(C) below, we agree with the result because Knapp failed to make an effective revocation of its acceptance under UCC Sec. 2-608. 54 When a buyer accepts goods, as defined in UCC Sec. 2-606, the buyer forfeits the right to reject the tender. UCC Sec. 2-607. However, a buyer may be able to revoke acceptance under UCC Sec. 2-608 as follows: 55 (1) The buyer may revoke his acceptance of a lot or commercial unit whose non-conformity substantially impairs its value to him if he has accepted it 56 (a) on the reasonable assumption that its non-conformity would be cured and it has not been seasonably cured; or 57 (b) without discovery of such non-conformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller's assurances.(2) Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. It is not effective until the buyer notifies the seller of it. 58 The buyer who revokes has the same rights and duties as if the buyer had rejected the goods. UCC Sec. 2-608. 59 Knapp argues that this case falls squarely within section 2-608(1)(b). It says that the sole-bond problems were hard to discover because they could not be detected by visible inspection and that it reasonably relied upon Sylvania's assurances that it had corrected the bond problem. Knapp cites to S & R Metals, Inc. v. C. Itoh & Co. (America), 859 F.2d 814 (9th Cir.1988), as authority for the view that a buyer can revoke acceptance when the prior acceptance was made without knowledge of the defect and the defect was latent and difficult to discover. 60 The difficulty with Knapp's position is that by mid-1988 it had ample knowledge that customers were complaining about separation, and its own experience confirmed that Sylvania was not successfully solving the underlying problems. Knapp itself points to pull-tests done in 1988 which, it argues, prove that Sylvania's manufacturing process was flawed. Yet not until spring 1990--the precise date is disputed--did Knapp purport to revoke acceptance for all shoes delivered to it over the entire period. 61 This is not a revocation occurring within a reasonable time after the buyer discovered the ground for rejection, and the contrast between the present facts and those of S & R Metals underscores the point. In that case, the buyer had no reason to doubt the quality of the steel until complaints were received; advance testing would have been expensive and destroyed the valuable product tested; and the revocation of acceptance was made within nine days after the defect had been discovered and confirmed. S & R Metals, 859 F.2d at 817. Nothing in this decision, or any other cited by Knapp, 5 suggests that a buyer can accept deliveries of a vast number of items over a period of a year and a half and then suddenly revoke the acceptance of all of them based on defects whose presence was known or suspected during the entire period. 62 Rejection of the February 1990 Shipment. A much narrower and stronger claim by Knapp is that it properly rejected the single shipment of shoes received in February 1990. Section 2-601 of the UCC provides that if goods or tender fail to conform to the parties' contract, the buyer may reject the whole delivery; 6 but this rejection must be within a reasonable time, and the buyer must seasonably notify the seller of the rejection. UCC Sec. 2-602(1). The magistrate judge found that Knapp failed to prove that the February shipment was nonconforming, and further found that Knapp's rejection was untimely. 63 Knapp insists that the shipment was nonconforming because all of the shoes in the shipment were defective inasmuch as they could be pulled apart manually. Crabtree, Knapp's key witness on this issue, so testified at trial. The magistrate judge made clear that he did not accept Crabtree's testimony, but this appraisal may well have been affected by the magistrate judge's mistaken finding on limitation of remedies: Crabtree also testified to the fact that the procedure of return of customer defects was established only in mid-1988 and that before that time customer returns were discarded, a fact that the magistrate judge found surprising in view of the clear understanding between the parties. 64 Knapp did carry out a prompt inspection of the shoes that arrived in the February 1990 shipment, complained immediately to Pearlstein that the shoes were 100 percent defective, and sent him a case for his own inspection. When the formal rejection occurred is disputed--the magistrate judge found that it did not occur until May--but Knapp's actions were certainly consistent with its claim of substantial defects and represented steps toward rejection. It immediately placed the seller on notice that the defects were pervasive and began to negotiate the seller's response. 65 The magistrate judge chose to credit fully the testimony of Pearlstein, Sylvania's president, to the effect that no shoes from the sample case sent by Knapp to Sylvania from the February shipment separated. But quite apart from other Knapp witnesses who supported Crabtree, other Sylvania employees--Elliott and Cartwright--both agreed that at least some of the shoes could be pulled apart by hand. Thus we find it hard to accept the magistrate judge's finding that plaintiff has failed to establish by a preponderance of the evidence that any of the shoes--much less the whole of the lot--failed to conform. 7 66 This court finds clear error only where, on the whole of the record, we form a strong unyielding belief that a mistake has been made. Cumpiano v. Banco Santander P.R., 902 F.2d 148, 152 (1st Cir.1990) (citations omitted). In this instance, we conclude that the magistrate judge was clearly in error in finding that the February 1990 shipment was free of defects and conformed to industry standard. The question whether Knapp gave prompt notice is more difficult, but we need not resolve the issue because whether Knapp rightfully rejected the nonconforming shipment has no practical impact on the damages to which it is entitled. With the magistrate judge's finding on defects set to one side, Knapp's ordinary damages as to the February shipment produce essentially the same amount as it would receive under the rejection remedy. See IV(C) below.