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    Acceptance and Rejection of Defective Products between Merchants

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    Hartz Seed Co. is a supplier of soy beans. Coleman contracted with Hartz for the delivery of one ton of soy beans, for delivery at Coleman's plant. After delivery, Coleman began inspecting the soy beans for quality. There is a specific inspection testing protocol/procedure involved, and usually takes several weeks to complete because it involves growing some of the seeds. After one month, Coleman noticed several defects in the seedlings that were growing. Coleman immediately notified Hartz of the defects, and rejected the entire lot.

    Hartz comes to you for advice concerning a possible action for breach against Colman. Specifically, Hartz asks whether Coleman has 1) accepted the goods, or 2) properly rejected the seeds. How do you advise Hartz? Use UCC provisions to support your answer/analysis.

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    Solution Preview

    First thing to discuss for any Contracts issue is the governing law. Whether it is for the sale of goods (governed by the UCC) or it's a service contract/real property contract (governed by the common law.)

    - Here, they are dealing with goods and the call of the question indicates that you need to use UCC provisions; therefore UCC will govern the contract.

    Under UCC 2-609 (1) a contract for sale imposes an obligation on each party that the other's expectation of receiving due performance will not be impaired. When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return.

    Every time you are dealing with UCC governed transactions, you also need to look and see if both sides are merchants and based on that pick the UCC provisions that apply to dealings between merchants.

    Under UCC 2-609 (2) between merchants the ...

    Solution Summary

    Overall - If you analyze properly that Coleman's protocol was not unreasonably long and the fact that they notified Hartz immediately, you may conclude that the whole shipment can be rejected. Although, Hartz has the right to cure the defect by re-delivering conforming goods.