Connecticut Investment Casting Corp. v. Made-Rite Tool Co.

Citations: 416 N.E.2d 966; 382 Mass. 603; 31 U.C.C. Rep. Serv. (West) 531; 1981 Mass. LEXIS 1099

Court: Massachusetts Supreme Judicial Court; February 17, 1981; Massachusetts; State Supreme Court

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Connecticut Investment Casting Corporation (Casting) initiated a lawsuit against Made-Rite Tool Co. Inc. to recover $5,170.81 for barrel latches supplied. Made-Rite counterclaimed for $50,000, citing damages due to Casting's breach of contract. The District Court ruled in favor of Made-Rite on Casting's complaint and in favor of Casting on Made-Rite's counterclaim. Casting appealed to the Appellate Division, which found no prejudicial error and dismissed the report.

The court's findings indicated that Casting was supposed to deliver 1,600 barrel latches by January 27, 1976, but only partially fulfilled the order over several months. Made-Rite needed these parts for a U.S. government contract, and evidence regarding Casting's awareness of this contract was conflicting. After notifying Casting of the breach, Made-Rite secured extensions for its government contract but ultimately missed the June 28, 1976 deadline, leading to cancellation and financial losses, including unresold latches and penalties.

Evidence presented showed that some latches did not conform to specifications. Made-Rite returned some for reworking but later chose to manage the rework itself. The District Court found that Casting had breached the contract due to late and nonconforming deliveries, while it ruled against Made-Rite's lost profit claims, determining that Casting was unaware of Made-Rite's government contract and that the claimed damages were not a direct result of Casting's breach. The Appellate Division confirmed the case was primarily factual and noted no errors.

The District Court judge incorrectly denied Casting's request for a ruling that Made-Rite accepted the barrel latches as a matter of law. The contract between Casting and Made-Rite falls under Article 2 of the Uniform Commercial Code (G.L.c. 106). Casting argued that Made-Rite accepted the goods by retaining them despite any nonconformities and failing to provide proper rejection notice as required by G.L.c. 106. 2-602 (1). According to G.L.c. 106. 2-606 (1), a buyer must notify the seller of any rejection in a timely manner, and failure to do so indicates acceptance if the buyer had a reasonable opportunity to inspect the goods.

Made-Rite did not notify Casting of any intention to reject the latches, had the opportunity to inspect them, and only returned the nonconforming latches. After further inspection, Made-Rite chose to rework the remaining nonconforming parts rather than reject them. The judge rejected Made-Rite's claim that various discussions constituted proper notice of rejection. The judge noted that pressuring for delivery does not equate to rejection.

Made-Rite also argued that it revoked its acceptance under G.L.c. 106. 2-608, but there was no evidence of timely notification to Casting regarding such revocation. Made-Rite did inform Casting of two breaches: a late delivery and nonconformity of 179 latches. However, despite these breaches, Made-Rite accepted the majority of the latches, including many after reworking. While notice of a breach can preserve a buyer's claim for damages, it does not suffice for rejection or revocation, which require explicit notification of the buyer's intent not to keep the goods.

Consequently, the conclusion is that Made-Rite effectively accepted the barrel latches and did not revoke this acceptance, thus obligating it to pay for the goods at the contract rate. Additionally, the judge found that Casting breached the contract due to late delivery and nonconformity, which led to the conclusion that Casting could not recover any purchase price.

Once a buyer accepts goods, their recourse for a seller's breach of contract is limited to suing for damages, as outlined in G.L.c. 106. 2-714. The court found that Made-Rite accepted the barrel latches and did not suffer any damages from Casting's breach. Consequently, Casting is entitled to the full contract price. The Appellate Division's order dismissing the report has been reversed, the finding for Made-Rite vacated, and judgment entered for Casting on its complaint.

The notes indicate that the evidence supports the plaintiff's complaint and does not warrant a finding for the defendant on either the plaintiff's complaint or the defendant's counterclaim. Key legal principles referenced include:
1. Acceptance of goods occurs when the buyer signifies conformity or retains the goods after inspection (G.L. ch. 106, Section 2-606).
2. Rejection must occur within a reasonable time and requires notification (G.L. ch. 106, Section 2-602).
3. A buyer may revoke acceptance of goods if their non-conformity substantially impairs value, but this must be done within a reasonable time after discovering the issue (G.L. ch. 106, Section 2-608).

Made-Rite is not appealing the adverse decision regarding its counterclaim.