- Did You Know: Rejection of Goods versus Revocation of Acceptance under the UCC-Similar but Different
- July 5, 2013 | Author: Hannah F.G. Singerman
- Law Firm: Weltman, Weinberg & Reis Co., L.P.A. - Cleveland Office
Sales of goods between businesses are covered by the Uniform Commercial Code Article 2 which has, in some form, been adopted by almost every state1. This is good in many ways for businesses who work nationally as the rules are the same for sales across the county. However, though the rules are generally uniform, they are often tricky and certain ones are important to note by buyer and seller businesses alike.
One of the most interesting rules for businesses is regarding the rejection of goods and revocation of acceptance of goods. Under the UCC, and under most state law, a buyer has the same remedies against a seller of non-conforming goods whether the goods were rejected or accepted with the acceptance later being revoked2. However, there can be no proper rejection or revocation of acceptance unless the goods are non-conforming to the contract between the parties.
Now if the goods are truly non-conforming and a proper rejection or revocation of acceptance has occurred, the buyer may cancel the contract completely, recover anything he has paid, not be held liable under the contract for the purchase price, recover damages for the cost to “cover” the rejected goods, and recover damages for non-delivery3. Also, in certain circumstances, the buyer, if the buyer partially paid and has a security interest in the goods, may recover damages for the cost and care of the goods as well as may sell the goods4.
However, those damages and non-liability are only available with a proper rejection or revocation of acceptance. Rejection must come at a reasonable time after delivery and must include notification to the seller of the rejection5. Further, if the buyer rejects the goods he cannot exercise ownership rights over the goods and must properly care and hold the goods until the seller can take back the rejected goods6.
A revocation of acceptance occurs after the buyer has accepted the goods. The revocation of acceptance, like the rejection, must occur after a reasonable time and must include notification to the seller7. A revocation of acceptance is permitted when the buyer accepted the goods under the assumption that any non-conformity would be cured or if the initial acceptance was induced either by an inability to quickly notice the inconformity or by assurances of the seller8.
Revocation of acceptance is an important concept to understand. Often when dealing with non-paying customers, a seller may not even hear of any complaints with the product until several invoices go unpaid. Sellers need to know when there is a legitimate issue with a purchase and when the buyer is trying to intimidate a seller after a failure to pay.
Though there are variations in state law, the principals of the UCC are generally consistent. Buyers and sellers alike should be aware of their duties to each other and sellers should not be intimidated by untimely complaints of non-paying customers.
1See UCC 2-104 and 2-105. The State of Louisiana has notably not accepted UCC Article 2 in any form.
2See UCC 2-602; 2-608; and 2-711.
3See UCC 2-711(1)
4See UCC 2-711(3)
5See UCC 2-602
7See UCC 2-608