Warranties Cases Midwest Mobile Diagnostic Imaging, LLC v. Dynamics Corporation of America (pg 406) PDF

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Sales Law Spring Lecture Notes - Case Analysis pg 406...

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SALES Lecture Notes Borges v. Magic Valley Here, the buyer, who had received nonconforming potatoes that he was entitled to reject, was instructed by the seller to blend the potatoes with others to bring them up to grade. The buyer did so without success. Thereafter and without authorization from the seller, buyer made the potatoes into flakes and resold them. The Idaho Supreme Court held that the buyer had accepted the goods under 2–606(1)(c) and had become liable for the contract price rather than for the lower amount received on resale. The court stressed that 2–603(1) is triggered by an absence of instructions from the seller. Here the seller had given instructions, and the buyer was not justified in his actions without further instructions from the seller. Section 2–603(3) provides that a buyer is “held only to good faith, and good faith conduct * * * [under 2–603] * * * is neither acceptance nor conversion nor the basis of an action for damages.” Graulich Caterer, Inc. v. Hans Holterbosch Installment contract “substantial impairment of the value of an installment….” Pg 404 highlighted paragraph in text Midwest Mobile Diagnostic Imaging, LLC v. Dynamics Corporation of America (pg 406) Rule: Under the Uniform Commercial Code, in an installment contract, a buyer may reject a seller’s attempt to cure a nonconforming installment if the defect substantially impairs the value of the installment. Facts: Midwest Mobile Diagnostic Imaging, L.L.C. (Midwest Mobile) (plaintiff) provided magnetic resonance imaging (MRI) services. Faced with increased demand for mobile MRI services, Midwest Mobile ordered four new trailers from Ellis & Watts, which was doing business as Dynamics Corporation of America (Dynamics) (defendant). Midwest Mobile instructed Dynamics to install MRI equipment in the trailers. Midwest Mobile included technical specifications related to the sensitivity of the MRI equipment. Midwest Mobile also emphasized interior-design standards. The trailers had to be aesthetically pleasing to meet the patients’ comfort expectations. The parties agreed on December 1, 1995 for the first delivery date. Midwest Mobile scheduled patients beginning December 4. Dynamics delivered the first trailer in late November. Midwest Mobile soon discovered that the trailer walls were unstable. Dynamics attempted to fix the problem by installing steel beams along the walls, and Dynamics redelivered the trailer on December 13. Midwest Mobile rejected the redelivered trailer, advising Dynamics that the steel beams were unsightly and interfered with the MRI equipment. Dynamics failed to offer additional repairs. On December 18, Midwest Mobile canceled the contract, and sued Dynamics for damages.

Issue: Under the Uniform Commercial Code, in an installment contract, may a buyer reject a seller’s attempt to cure a nonconforming installment if the defect substantially impairs the value of the installment? Holding: Yes. A buyer may reject a seller’s attempt to cure a nonconforming installment if the defect substantially impairs the value of the installment. The nature of a buyer’s right to reject nonconforming goods depends on whether the contract is a single-delivery contract or an installment contract. Single-delivery contracts are governed by a modified version of the perfecttender rule under UCC § 2-601. This means, generally, goods delivered under a single-delivery contracts must match the contract specifications very closely or else the buyer can lawfully reject the goods. In contrast, in an installment contract, UCC § 2-612 only makes the seller provide goods that are substantially like the goods ordered, not exactly like the goods ordered. This means, under an installment contract, a buyer can reject a particular nonconforming installment only if the defect substantially impairs the value of the installment. The seller also has an opportunity to cure the defect within a reasonable amount of time. Additionally, delivery of nonconforming goods in an installment contract allows a buyer to cancel the entire contract only if the defect impairs the value of the entire contract. In this case, the agreement was an installment contract for four trailers, each to be delivered separately. The first trailer Dynamics delivered was defective because the walls were unstable. Under UCC § 2-612, Dynamics had an opportunity to fix the walls within a reasonable amount of time, but its attempted fix substantially impaired the value of the trailer instead. Because the defect was not cured, Midwest Mobile was entitled to reject that delivery. Furthermore, Dynamics’s delays and design defects have already interfered with Midwest Mobile’s ability to meet with patients. Dynamics has also not provided any assurance that Dynamics is capable of delivering satisfactory trailers in the future. Therefore, the design and delay problems were serious enough that Midwest Mobile had the right to cancel the entire installment contract....