Ucc Rejection

This panel discusses the Uniform Commercial Code rules regarding delivery, acceptance, rejection, and revocation of acceptance of goods. These rules contain extremely important principles governing how a buyer must react with regard to defective goods. Failure to follow these rules may prejudice the buyer's rights in some respects. As always, the information here is for educational purposes: you should seek legal advice when you have a specific issue.

Acceptance

The critical point of decision comes when the goods arrive, and the buyer must determine whether to accept them. When the box with your new Dell computer arrives UPS, you sign for it. You don't make the UPS person stand there and wait while you inspect. When you sign, you haven't accepted the goods yet. According to Code section 2-306:

Acceptance of goods occurs when the buyer--

(a) after a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that the buyer will take or retain them in spite of their
(b) fails to make an effective rejection (subsection (1) of section 2-602), but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them; or
(c) does any act inconsistent with the seller's ownership; but if such act is wrongful as against the seller it is an acceptance only if ratified by the seller.

Acceptance of a part of any commercial unit is acceptance of that entire unit.

So when your computer comes, you have a reasonable opportunity to unpack and set her up. But don't put it in the basement and wait for a month; that's probably beyond your reasonable opportunity to inspect. If you want to preserve your right to reject the merchandise, you need to act expeditiously to inspect, and if the goods are unsatisfactory, you need to make an effective rejection. And for goodness sake, don't be tampering with the insides, because that may well be an act inconsistent with the seller's ownership, precluding rejection.

What is the impact of acceptance? Acceptance does not prevent you from enforcing your warranty; it doesn't prevent you from claiming damages for breach of your contract. Acceptance makes it harder to cancel the contract, to reject and return the merchandise and receive a full refund. After you accept, your remedies are more likely to be limited to repair, replacement, or damages. Prior to acceptance, you may be able to reject the merchandise for small defects; after acceptance, if you want to accomplish return and refund, you need to revoke your acceptance, and that requires a greater breach by the seller (about which more later).

Here are some of the consequences of acceptance. Section 2-607 says that: (1) The buyer must pay at the contract rate for any goods accepted. In addition, as we have said:

(2) Acceptance of goods by the buyer precludes rejection of the goods accepted and if made with knowledge of a nonconformity cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured but acceptance does not of itself impair any other remedy provided by this article for nonconformity.
(3) Where a tender has been accepted:

(a) the buyer must within a reasonable time after the buyer discovers or should have discovered any breach notify the seller of breach or be barred from any remedy; and
(b) if the claim is one for infringement or the like (subsection (3) of section 2-312) and the buyer is sued as a result of such a breach the buyer must so notify the seller within a reasonable time after receiving notice of the litigation or be barred from any remedy over for liability established by the litigation.

How do you accomplish a rejection? You notify the seller within a reasonable time, of course. Section 2-602 says that:

(1) Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.

Draft your rejection notice carefully. The code expects that you provide a full list of defects in your rejection notice. That prevents the buyer from making up new problems, in the event that the reasons originally given are inadequate or untrue. Section 2-605 waives objections not contained in your list of reasons under certain circumstances:

The buyer's failure to state in connection with rejection a particular defect which is ascertainable by reasonable inspection precludes the buyer from relying on the unstated defect to justify rejection or to establish breach

(a) where the seller could have cured it if stated seasonably; or
(b) between merchants when the seller has after rejection made a request in writing for a full and final written statement of all defects on which the buyer proposes to rely.

Payment against documents made without reservation of rights precludes recovery of the payment for defects apparent on the face of the documents.

And after you reject the goods, you treat the goods as if they belong to someone else, for they do. You are now holding them for the seller. You stop using them; you keep them safe and secure:

(a) after rejection any exercise of ownership by the buyer with respect to any commercial unit is wrongful as against the seller; and
(b) if the buyer has before rejection taken physical possession of goods in which the buyer does not have a security interest under the provisions of this article (subsection (3) of section 2-711), the buyer is under a duty after rejection to hold them with reasonable care at the seller's disposition for a time sufficient to permit the seller to remove them; but
(c) the buyer has no further obligations with regard to goods rightfully rejected.

If you buy more than one "commercial unit", you may accept all the goods, reject all of them, or accept any commercial unit and reject the rest. Section 2-601. But your rights may be limited by specific contractual limitations (discussed later).

Revocation of acceptance in whole or in part. What if you accept your Dell computer, and it works fine for a few days and then goes caput. (This is hypothetical, of course, because Dell provides great service). Once you have accepted the computer you cannot ship the computer back for a refund simply because it broke, even if it broke in violation of the warranty. You have accepted the merchandise; now you must look to your rights under the contract and accompanying warranties. At this point, if you don't want the computer anymore, you cannot reject. You can revoke your acceptance, however, if the "nonconformity substantially impairs its value", but only if:

(a) you accepted on "the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured." In other words, when you got your computer, you discovered a hard drive defect, and thus could have rejected, but since Dell has a public policy of fixing defects, you kept it. If now the manufacturer fails to repair or replace, you may revoke your acceptance; or
(b) you accepted "without discovery of such nonconformity, if the acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller's assurances." In other words, the hard drive was defective at the time of shipment, but you couldn't reasonably have figured that out.

Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it. Moreover, you may not revoke your acceptance after "any substantial change in condition of the goods" unless the change was caused by the defect itself. If you paint the computer blue, you can't revoke your acceptance, even if the hard drive was defective at time of shipment.

If you cannot revoke your acceptance, you still have other remedies. You may have a right to repair under the warranty. You may have a right to damages. And, if the seller fails to honor its contractual obligations regarding repair and service, you may under appropriate circumstances have the right to rescind the contract.