C. R. Daniels, Inc. v. Yazoo Manufacturing Company, Inc.,

641 F. Supp. 205 (1986)

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Nature of the Case

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Facts

P and D entered an agreement where P would design and manufacture grass catcher bags for 'S' series lawn mowers to be manufactured by D. P was to begin manufacture upon approval by D of a design and sample of the proposed bag. Timing was critical because of the seasonal nature of d's business. D did not deliver an 'S' series mower to P until late November 1981. The bag design and sample were approved in December 1981 although frames for use with the bag were not approved until February 1982. The initial purchase order was issued on October 23, 1981, prior to final approval of the designs, so that P could begin ordering raw materials. D contracted for 20,000 bags and the evidence showed that P thereafter purchased material to manufacture as many bags. The initial purchase order for frames was dated December 28, 1981, and ordered 10,500 frames. Subsequent purchase orders issued in April, May, and June merely altered the delivery schedule but did not change the total number of bags and frames ordered. After the initial shipment, P, at D's request changed from bulk packages to individual boxes containing ten or sixteen bags to expedite shipment to D dealers. The chutes on the bags were flattened. With the new shipping, D began to see evidence of a problem with cracking chutes on the bags. Based on the presence of tire marks on the bag, P determined the problem to be caused by abuse. P continued to manufacture. On October 14, 1982, D sent a photocopy of the July 5 purchase order with 'canceled' written on its face. D offered no explanation, and no other orders were canceled. Eventually, P demanded payment and D notified P regarding the specific complaints on a good number of the bags. On May 18^th P learned from inspection that 92% of the bags had cracked chutes. Until this time, P had been unaware that the chutes were defective in a substantial number of bags. Upon learning the results of D's inspection, P found that approximately seventy-five percent of the bags that it held were also faulty. D continued to sell the bags and continued to tell P that it would sell the bags and expected future deliveries. The defective bags were destroyed. P sued D to recover the price of the goods under UCC 2-709 (1972), which provides in part: (1) When the buyer fails to pay the price as it becomes due the seller may recover, together with any incidental damages under the next section, the price (a) of goods accepted or conforming goods lost or damaged within a commercially reasonable time after risk of their loss is passed to the buyer; and (b) of goods identified to the contract if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing. D argues it never accepted the bag and frames under UCC 2-606 (1972), which provides in part: (1) Acceptance of goods occurs when the buyer(a) after a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that he will take or retain them in spite of their nonconformity; or (b) fails to make an effective rejection (subsection 1 of section 2-602) [2-602(1)], but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them; or (c) does any act inconsistent with the seller's ownership; but if such act is wrongful as against the seller it is an acceptance only if ratified by him.