Document Type

Article

Publication Year

2009

Journal Title

San Diego Law Review

Abstract

An aggrieved buyer that fails to give its seller timely notification of breach, or that gives a timely but insufficient notification, suffers serious and sometimes catastrophic consequences under Article 2 of the Uniform Commercial Code (UCC or Code). On the serious end, a buyer entitled to reject must provide its seller with a timely notification that makes it clear that the goods again belong to the seller, with failure as to either timeliness or sufficiency resulting in acceptance rather than rejection. Obvious policy rationales support both requirements. The timeliness requirement creates an incentive for a buyer to exercise its inspection rights quickly. Prompt detection and reporting of a nonconformity is desirable because a cure can be effectuated more quickly, thereby mitigating the harm to both parties. If there is no cure, the seller can maximize the goods' resale value by recovering them quickly and, as nearly as practicable, in the same condition as when they were tendered. Regarding sufficiency, if a notification merely states that there is a problem, the seller could legitimately assume that the buyer intends to accept the goods and that the purpose of the notification is to preserve its right to recover monetary damages. This level of information will not suffice for a rejection: The seller must be made aware that the buyer does not intend to keep the goods so that it can exercise its cure rights or recover the goods. A revocation of acceptance also requires a timely notification that advises the seller that the seller owns the goods, and the underlying policies are the same as in cases of rejection.

Section 2-607(3)(a) provides that "the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy." This rule is a nuclear bomb that, if triggered, eradicates all remedies. One would anticipate that such a catastrophic result must be grounded in appropriate policies but, as we shall see, many of the rationales that have been advanced to support it are thoroughly unconvincing. Note at the outset that the policies underlying the notification requirements in cases of rejection and revocation of acceptance do not apply in this context because the buyer rather than the seller owns the goods and the seller does not have statutory cure rights.

Professor Richard Speidel, to whose memory this tribute issue is dedicated, sought through the Article 2 revision process to ameliorate the harsh effects of section 2-607(3)(a). After he resigned as Reporter in 1999 and the scope of the project was scaled back, the solution he drafted retained the support of the reconstituted drafting committee and was included among the amendments promulgated by the Code's sponsors in 2003. His solution captures the essence of the need for postacceptance notification and articulates a viable standard to satisfy that need.

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573

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