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

Exercise 19

FACTS Alpha Chi Omega (AXO), a sorority, entered into an oral contract with Furlong to buy 168 ''customdesigned'' sweaters for the Midnight Masquerade III. The purchase price of $3,612 was to be paid as follows: $2,000 down payment and $1,612 upon delivery. During phone conversations with Furlong, Emily, the AXO social chairperson, described the design to be imprinted on the sweater. She also specified the colors to be used in the lettering (hunter green on top of maroon outlined in navy blue) and the color of the mask design (hunter green). Furlong promised to have a third party imprint the sweaters as specified. Furlong later sent to Emily a sweater with maroon letters to show her the color. He then sent her a fax illustrating the sweater design with arrows indicating where each of the three colors was to appear. On the day before delivery was due, Argento, Furlong's supplier, requested design changes, which Furlong approved without the consent of AXO. These changes included deleting the navy blue outline, reducing the number of colors from three to two, changing the maroon lettering to red, and changing the color of the masks from hunter green to red. Upon delivery, AXO gave a check for the balance of the purchase price. Later that day, Emily inspected the sweaters and was dismayed at the design changes. AXO immediately stopped payment on the check. Amy, the president of AXO, phoned Furlong, stating that the sweaters were not whatAXOhad ordered. She gave the specifics as to why the sweaters were not as ordered and offered to return them. Furlong refused but offered to reduce the unit price of the sweaters ifAXOagreed to accept them. AXOrefused this offer. Furlong then filed suit against AXO for the unpaid portion of the sweaters' purchase price ($1,612) and AXO counterclaimed for return of the down payment ($2,000).
DECISION Judgment for AXO. The court ordered Furlong to pay $2,000 plus interest and costs and AXO to return the sweaters upon such payment.
OPINION Bachman, J. Furlong and Emily created an express warranty by *** affirmation of fact (his initial phone calls); by sample (the maroon sweater); by description (the fax). This express warranty became part of the contract. Each of the three methods of showing the express warranty was not in conflict with the other two methods, and thus they are consistent and cumulative [U.C.C. § 2-317], and constitute the warranty.
The design was a ''dickered'' aspect of the individual bargain and went clearly to the essence of that bargain ([U.C.C. § 2-313]; Official Comment 1 to UCC 2-313). Thus, the express warranty was that the sweaters would be in accordance with the above design (including types of colors for the letters and the mask, and the number of colors for the same). Further, the express warranty became part of the contract.
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Furlong's obligation as the seller was to transfer and deliver the goods in accordance with the contract. AXO's obligation was to accept and pay in accordance with that contract [U.C.C. § 2-301].
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The sweaters did not conform to the contract (specifically, the express warranty in the contract). Thus (in the words of the statute), the sweaters did ''fail in any respect to conform to the contract.'' Actually, the sweaters failed in at least five respects [U.C.C. § 2-601]. *** they were a nonconforming tender of goods [U.C.C. § 2-601].
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AXO, as the buyer, had the right to inspect the boxes of sweaters before payment or acceptance [U.C.C. § 2-513]. AXO did so at a reasonable time and place, and in a reasonable manner, on the same day that Furlong had sent the sweaters and AXO had received them [U.C.C. § 2-513]. AXO's purpose of inspection had (in the words of the statute) ''to do with the buyer's check-up on whether the seller's performance is in accordance with a contract previously made ***.'' (Official Comment 9 to UCC 2-513.)
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According to the statute, ''if the goods *** fail in any respect to conform to the contract, the buyer may: (A) reject the whole *** [.]'' [U.C.C. § 2-601]. As concluded above, the sweaters were nonconforming goods. Therefore, Furlong breached the contract, and AXO had the right to reject the goods (sweaters).
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As concluded above, AXO rightfully rejected the sweaters, after having paid part of the purchase price: namely $2,000. AXO is entitled to cancel the contract and to recover the partial payment of the purchase price. [Citation.]
INTERPRETATION If the goods fail in any respect to conform to the contract, the buyer may reject the whole lot.
ETHICAL QUESTION Did Furlong act in bad faith by not seeking AXO's consent to the changes? Explain.
CRITICAL THINKING QUESTION Does the court's decision remedy the situation in which the seller's breach left the sorority? Explain.