Ramirez v. Autosport

Decision Date04 February 1982
Citation440 A.2d 1345,88 N.J. 277
Parties, 33 UCC Rep.Serv. 134 Ernest RAMIREZ and Adele Ramirez, Plaintiffs-Respondents, v. AUTOSPORT, a corporation of the State of New Jersey, Defendant-Appellant.
CourtNew Jersey Supreme Court

Leonard Rosenstein, Livingston, for defendant-appellant (Feuerstein, Sachs & Maitlin, Livingston, attorneys).

Leo Kaplowitz, Linden, for plaintiffs-respondents (Kaplowitz & Wise, Linden, attorneys).

The opinion of the Court was delivered by

POLLOCK, J.

This case raises several issues under the Uniform Commercial Code ("the Code" and "UCC") concerning whether a buyer may reject a tender of goods with minor defects and whether a seller may cure the defects. We consider also the remedies available to the buyer, including cancellation of the contract. The main issue is whether plaintiffs, Mr. and Mrs. Ramirez, could reject the tender by defendant, Autosport, of a camper van with minor defects and cancel the contract for the purchase of the van.

The trial court ruled that Mr. and Mrs. Ramirez rightfully rejected the van and awarded them the fair market value of their trade-in van. The Appellate Division affirmed in a brief per curiam decision which, like the trial court opinion, was unreported. We affirm the judgment of the Appellate Division.

I

Following a mobile home show at the Meadowlands Sports Complex, Mr. and Mrs. Ramirez visited Autosport's showroom in Somerville. On July 20, 1978 the Ramirezes and Donald Graff, a salesman for Autosport, agreed on the sale of a new camper and the trade-in of the van owned by Mr. and Mrs. Ramirez. Autosport and the Ramirezes signed a simple contract reflecting a $14,100 purchase price for the new van with a $4,700 trade-in allowance for the Ramirez van, which Mr. and Mrs. Ramirez left with Autosport. After further allowance for taxes, title and documentary fees, the net price was $9,902. Because Autosport needed two weeks to prepare the new van, the contract provided for delivery on or about August 3, 1978.

On that date, Mr. and Mrs. Ramirez returned with their checks to Autosport to pick up the new van. Graff was not there so Mr. White, another salesman, met them. Inspection disclosed several defects in the van. The paint was scratched, both the electric and sewer hookups were missing, and the hubcaps were not installed. White advised the Ramirezes not to accept the camper because it was not ready.

Mr. and Mrs. Ramirez wanted the van for a summer vacation and called Graff several times. Each time Graff told them it was not ready for delivery. Finally, Graff called to notify them that the camper was ready. On August 14 Mr. and Mrs. Ramirez went to Autosport to accept delivery, but workers were still touching up the outside paint. Also, the camper windows were open, and the dining area cushions were soaking wet. Mr. and Mrs. Ramirez could not use the camper in that condition, but Mr. Leis, Autosport's manager, suggested that they take the van and that Autosport would replace the cushions later. Mrs. Ramirez counteroffered to accept the van if they could withhold $2,000, but Leis agreed to no more than $250, which she refused. Leis then agreed to replace the cushions and to call them when the van was ready.

On August 15, 1978 Autosport transferred title to the van to Mr. and Mrs. Ramirez, a fact unknown to them until the summer of 1979. Between August 15 and September 1, 1978 Mrs. Ramirez called Graff several times urging him to complete the preparation of the van, but Graff constantly advised her that the van was not ready. He finally informed her that they could pick it up on September 1.

When Mr. and Mrs. Ramirez went to the showroom on September 1, Graff asked them to wait. And wait they did-for one and a half hours. No one from Autosport came forward to talk with them, and the Ramirezes left in disgust.

On October 5, 1978 Mr. and Mrs. Ramirez went to Autosport with an attorney friend. Although the parties disagreed on what occurred, the general topic was whether they should proceed with the deal or Autosport should return to the Ramirezes their trade-in van. Mrs. Ramirez claimed they rejected the new van and requested the return of their trade-in. Mr. Lustig, the owner of Autosport, thought, however, that the deal could be salvaged if the parties could agree on the dollar amount of a credit for the Ramirezes. Mr. and Mrs. Ramirez never took possession of the new van and repeated their request for the return of their trade-in. Later in October, however, Autosport sold the trade-in to an innocent third party for $4,995. Autosport claimed that the Ramirez' van had a book value of $3,200 and claimed further that it spent $1,159.62 to repair their van. By subtracting the total of those two figures, $4,159.62, from the $4,995.00 sale price, Autosport claimed a $600-700 profit on the sale.

On November 20, 1978 the Ramirezes sued Autosport seeking, among other things, rescission of the contract. Autosport counterclaimed for breach of contract.

II

Our initial inquiry is whether a consumer may reject defective goods that do not conform to the contract of sale. The basic issue is whether under the UCC, adopted in New Jersey as N.J.S.A. 12A:1-101 et seq., a seller has the duty to deliver goods that conform precisely to the contract. We conclude that the seller is under such a duty to make a "perfect tender" and that a buyer has the right to reject goods that do not conform to the contract. That conclusion, however, does not resolve the entire dispute between buyer and seller. A more complete answer requires a brief statement of the history of the mutual obligations of buyers and sellers of commercial goods.

In the nineteenth century, sellers were required to deliver goods that complied exactly with the sales agreement. See Filley v. Pope, 115 U.S. 213, 220, 6 S.Ct. 19, 21, 29 L.Ed. 372, 373 (1885) (buyer not obliged to accept otherwise conforming scrap iron shipped to New Orleans from Leith, rather than Glasgow, Scotland, as required by contract); Columbian Iron Works & Dry-Dock Co. v. Douglas, 84 Md. 44, 47, 34 A. 1118, 1120-1121 (1896) (buyer who agreed to purchase steel scrap from United States cruisers not obliged to take any other kind of scrap). That rule, known as the "perfect tender" rule, remained part of the law of sales well into the twentieth century. By the 1920's the doctrine was so entrenched in the law that Judge Learned Hand declared "(t)here is no room in commercial contracts for the doctrine of substantial performance." Mitsubishi Goshi Kaisha v. J. Aron & Co., Inc., 16 F.2d 185, 186 (2 Cir. 1926).

The harshness of the rule led courts to seek to ameliorate its effect and to bring the law of sales in closer harmony with the law of contracts, which allows rescission only for material breaches. LeRoy Dyal Co. v. Allen, 161 F.2d 152, 155 (4 Cir. 1947). See 5 Corbin, Contracts § 1104 at 464 (1951); 12 Williston, Contracts § 1455 at 14 (3 ed. 1970). Nevertheless, a variation of the perfect tender rule appeared in the Uniform Sales Act. N.J.S.A. 46:30-75 (purchasers permitted to reject goods or rescind contracts for any breach of warranty); N.J.S.A. 46:30-18 to -21 (warranties extended to include all the seller's obligations to the goods). See Honnold, "Buyer's Right of Rejection, A Study in the Impact of Codification Upon a Commercial Problem", 97 U.Pa.L.Rev. 457, 460 (1949). The chief objection to the continuation of the perfect tender rule was that buyers in a declining market would reject goods for minor nonconformities and force the loss on surprised sellers. See Hawkland, Sales and Bulk Sales Under the Uniform Commercial Code, 120-122 (1958), cited in N.J.S.A. 12A:2-508, New Jersey Study Comment 3.

To the extent that a buyer can reject goods for any nonconformity, the UCC retains the perfect tender rule. Section 2-106 states that goods conform to a contract "when they are in accordance with the obligations under the contract". N.J.S.A. 12A:2-106. Section 2-601 authorizes a buyer to reject goods if they "or the tender of delivery fail in any respect to conform to the contract". N.J.S.A. 12A:2-601. The Code, however, mitigates the harshness of the perfect tender rule and balances the interests of buyer and seller. See Restatement (Second), Contracts, § 241 comment (b) (1981). The Code achieves that result through its provisions for revocation of acceptance and cure. N.J.S.A. 12A:2-608, 2-508.

Initially, the rights of the parties vary depending on whether the rejection occurs before or after acceptance of the goods. Before acceptance, the buyer may reject goods for any nonconformity. N.J.S.A. 12A:2-601. Because of the seller's right to cure, however, the buyer's rejection does not necessarily discharge the contract. N.J.S.A. 12A:2-508. Within the time set for performance in the contract, the seller's right to cure is unconditional. Id., subsec. (1); see id., Official Comment 1. Some authorities recommend granting a breaching party a right to cure in all contracts, not merely those for the sale of goods. Restatement (Second), Contracts, ch. 10, especially §§ 237 and 241. Underlying the right to cure in both kinds of contracts is the recognition that parties should be encouraged to communicate with each other and to resolve their own problems. Id., Introduction p. 193.

The rights of the parties also vary if rejection occurs after the time set for performance. After expiration of that time, the seller has a further reasonable time to cure if he believed reasonably that the goods would be acceptable with or without a money allowance. N.J.S.A. 12A:2-508(2). The determination of what constitutes a further reasonable time depends on the surrounding circumstances, which include the change of position by and the amount of inconvenience to the buyer. N.J.S.A. 12A:2-508, Official Comment 3. Those circumstances also include the length of time needed by the seller to correct the...

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