Harlow & Jones, Inc. v. Advance Steel Co. - 424 F. Supp. 770 (E.D. Mich. 1976)

Rule:

Under the final sentence of the U.C.C. § 2-504, rejection by the buyer is justified only when the seller's dereliction as to any of the requirements of this section in fact is followed by material delay or damage. It rests on the seller, so far as concerns matters not within the peculiar knowledge of the buyer, to establish that his error has not been followed by events which justify rejection. U.C.C. § 2-504 official cmt. 6.

Facts:

Plaintiff seller, Harlow and Jones, Inc., and defendant buyer, Advance Steel Co. reached an oral sales contract for the purchase of 1000 tons of imported European steel before they began exchanging forms that were never signed. The form specified a shipment date of “September-October, 1974.” It also specified a “C.I.F.” shipping term. In October, due to the alleged delay in shipment of the steel, defendant rejected the same, resulting in the filing of the instant case, wherein the plaintiff sought to recover damages and costs for an alleged breach of contract. Defendant denied liability, claiming that the shipment of steel was late and was therefore properly rejected under the contract. The parties agreed that their respective rights and liabilities in the current action were governed by the Uniform Commercial Code.

Issue:

Was the defendant buyer justified in rejecting the steel shipment on the basis of late delivery? 

Answer:

No.

Conclusion:

The court found that only a material delay would justify the buyer's rejection. Noting that under a recognized trade usage, a shipment term of September to October implied delivery by October to November, the court held that any delay in shipment was cured by a timely delivery of November 29. Finding that the buyer's repudiation in October was premature and that the buyer instead should have demanded adequate assurances from the seller, the court held that the buyer breached the contract and awarded the seller the difference between the resale and the contract price.