Business Law and the Regulation of Business 11th Edition by Richard Mann, Barry Roberts

Exercise 11

Can-Key Industries, Inc., manufactured a turkey-hatching unit, which it sold to Industrial Leasing Corporation (ILC), which leased it to Rose-A-Linda Turkey Farms. ILC conditioned its obligation to pay on Rose-A-Linda's acceptance of the equipment. Rose-A-Linda twice notified Can- Key that the equipment was unacceptable and asked that it be removed. Over a period of fifteen months Can-Key made several unsuccessful attempts to solve the problems with the equipment. During this time, Can-Key did not instruct Rose-A-Linda to refrain from using the equipment. Rose-A-Linda indicated its dissatisfaction with the equipment, and ILC refused to perform its obligations under the contract. Can-Key then brought suit against ILC for breach of contract. It argued that Rose-A-Linda accepted the equipment, because it used it for fifteen months. ILC countered that the equipment was unacceptable and asked that it be removed. It claimed that Can- Key refused and failed to instruct Rose-A-Linda to refrain from using the equipment. Therefore, ILC argued, Rose- A-Linda effectively rejected the turkey-hatching unit, relieving ILC of its contractual obligations. Who is correct? Explain.