Contracts II

Continental Forest Products, Inc. v White Lumber Sales, Inc.

Supreme Court of Oregon, 1970

Facts:

In an installment contract, plaintiff agreed to sell defendant 20 carloads of plywood and deliver them to Gainesville, Georgia. When the first carload arrived, much of the plywood was too thin, and defendant notified plaintiff of his intent to cancel the contract due to the plywood's nonconformance to the specifications. However, plaintiff had already shipped the next two carloads. The second arrived, while the third was stopped en route.

The parties then agreed to an inspection of the plywood to see whether it actually fit the specified standard's 5% variance that was allowed. The first carload had a 9% variance, while the second had 5%. Defendant agreed to pay full price for the first carload, but refused to pay for any of the others, while were sold to other buyers. Plaintiff sued to recover his damages.

Procedural History:

Trial court found for plaintiff.

Issue:

Did the nonconformity substantially impair the value of the whole contract?

Defendant's Argument:

The failure to meet the specifications of the contract is equivalent to substantially impairing the value of the whole contract.

Rules:

  • UCC § 2-612(2)–(3)
    1. The buyer may reject any installment which is non-conforming if the non-conformity substantially impairs the value of that installment and cannot be cured or if the non-conformity is a defect in the required documents; but if the non-conformity does not fall within subsection (3) and the seller gives adequate assurance of its cure the buyer must accept that installment.
    2. Whenever non-conformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a breach of the whole. But the aggrieved party reinstates the contract if he accepts a non-conforming installment without seasonably notifying of cancellation or if he brings an action with respect only to past installments or demands performance as to future installments.
  • Nonconformity can usually be cured by a reduction in price.

Holding:

This was a minor deviation from conformity and was curable within the meaning of UCC § 2-612(2). Affirmed.