Battle of the Forms and Revocation After Resale
Boutique, a clothing retailer, sent Supplier a purchase order for 500 leather handbags at $40 each, for delivery by March 1. The purchase order stated that acceptance was limited to its terms. Supplier's acknowledgment form stated that acceptance was contingent on Buyer agreeing to a 2% late-payment fee and binding arbitration. The bags arrived March 5. Buyer accepted them, sold 100, and displayed the rest. On March 20, Buyer discovered that 150 bags had discoloration that would make them unsalable at full price. Buyer notified Supplier on April 10 and demanded revocation of acceptance, return of the price, and damages. Supplier argues that its acknowledgment terms govern, that Buyer accepted the goods, and that the notice was untimely. The contract is governed by the UCC. Buyer has not paid the invoice. The court must decide which terms are part of the contract and whether Buyer may revoke.
1. Which terms govern the contract-the purchase order, the acknowledgment, or UCC gap fillers?
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The purchase order expressly limited acceptance to its terms. Supplier's acknowledgment was conditional because it required new terms-a 2% late fee and arbitration. Under UCC 2-207(1), a conditional acceptance is not an acceptance but a counteroffer. Buyer did not expressly accept; instead, it accepted the bags and sold some. That conduct forms a contract under 2-207(3), with terms consisting of those on which the writings agree, supplemented by UCC gap fillers. The writings agree on the goods, quantity, and $40 price. They do not agree on the late fee or arbitration; those are not included. The March 1 delivery term appears only in the purchase order and is not agreed to in the acknowledgment, so the UCC's reasonable-time gap filler governs; March 5 may be reasonable. If a court instead treats the acknowledgment as a definite acceptance, the late fee and arbitration would still likely be material alterations and excluded unless Buyer expressly agreed. Supplier's terms do not govern.
2. Did Buyer accept the goods, and may Buyer revoke acceptance?
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Buyer accepted the goods. Under UCC 2-606, acceptance occurs when the buyer, after a reasonable opportunity to inspect, signifies that the goods are accepted or does an act inconsistent with the seller's ownership. Selling 100 bags and displaying the rest is inconsistent with ownership and is acceptance. Buyer may revoke under UCC 2-608 only if the nonconformity substantially impairs the value of the whole lot and Buyer accepted on the reasonable assumption that the nonconformity would be cured, or the nonconformity was discovered after acceptance. Discoloration making 150 bags unsalable at full price can substantially impair value. Buyer discovered the defect after acceptance. But revocation must occur before any substantial change in condition not caused by the defect. Selling 100 bags may bar revocation as to those, but not necessarily as to the remaining 150. Buyer can seek revocation of the nonconforming bags and damages.
3. Was Buyer's April 10 notice timely?
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Notice must be given within a reasonable time after the buyer discovers or should have discovered the breach. UCC 2-607(3) requires notification of breach; for revocation, 2-608 requires notice within a reasonable time after discovery. Buyer discovered the defect on March 20 and notified Supplier on April 10-21 days later. Whether that is reasonable is a fact question. Courts consider the nature of the defect, the buyer's sophistication, the need for inspection, and prejudice to the seller. A three-week delay is not automatically untimely; it may be reasonable if Buyer was investigating the extent of the discoloration or attempting to mitigate. However, because Buyer sold some bags and displayed others, Supplier may argue prejudice from delay. The court should deny summary judgment on timeliness unless the delay was clearly unreasonable.