Tuesday, October 2, 2012

T. W. Oil, Inc. v. Consolidated Edison Co. case brief

T. W. Oil, Inc. v. Consolidated Edison Co. Heading: 57 N.Y.2d 574

FACTS

-On appeal of a judgment for an oil supplier in its contract action, the court disagreed with the contention that the trial court erred in ignoring the jury’s determination of the buyer’s reasonable rejection of the supplier’s offer to cure a nonconforming oil shipment.
-The word “reasonable” was employed only to qualify a seller’s conduct once the seller invoked N.Y. U.C.C. Law § 2-508(2), a finding by the jury that the buyer’s conduct was reasonable was irrelevant to application of § 2-508(2). Thus, it was not error to ignore the jury’s answer to the question.
-A fair interpretation of § 2-508(2) required the buyer to accept the substitute shipment of conforming oil. Once the oil supplier gave seasonable notice, it was permitted to cure the defect within a reasonable time beyond the time the contract was to be performed, as it had acted in good faith and with a reasonable expectation that the original oil shipment was acceptable to the buyer.
-Section 2-508(2) was not limited to cases in which the seller knowingly made a nonconforming tender it believed the buyer would accept.
-As the theory of damages was agreed to by the parties at trial, the damages award was affirmed.

PROCEDURAL HISTORY
-Respondent oil supplier commenced a breach of contract action against appellant buyer after the buyer rejected its offer to cure a nonconforming oil shipment. The trial court rendered judgment for the oil supplier, awarding damages equal to the difference between the contract and resale prices.
-The Appellate Division of the Supreme Court in the First Judicial Department (New York) affirmed. -The buyer appealed.

RULES
-If a buyer rejects nonconforming tender which the seller had reasonable grounds to believe would be accepted, the seller has a reasonable time to substitute a conforming tender if he seasonably notifies the buyer of such substitution.
-A seller has recourse to the relief afforded by U.C.C. Law § 2-508(2) if it can establish that it had reasonable grounds, tested objectively, for its belief that the goods would be accepted.
-The test of reasonableness, in this context, encompasses the concepts of “good faith” and commercial standards of fair dealing which permeate the Uniform Commercial Code.

ANALYSIS

-If seasonable notice be given, a seller who, acting in good faith and without knowledge of any defect, tenders nonconforming goods to a buyer who properly rejects them may offer to cure the defect within a reasonable period beyond the time when the contract is to be performed so long as the seller has acted in good faith and with a reasonable expectation that the original goods would be acceptable to the buyer.
-Where any tender or delivery by the seller is rejected because it is non-conforming and the time for performance has not yet expired, the seller may seasonably notify the buyer of his intention to cure and may then within the contract time make a conforming delivery. Where the buyer rejects a non-conforming tender which the seller had reasonable grounds to believe would be acceptable with or without money allowance the seller may, if he seasonably notifies the buyer, have a further reasonable time to substitute a conforming tender. N.Y. U.C.C. Law § 2-508.
-Essentially a factual matter, “seasonable” is defined in the Uniform Commercial Code as at or within the time agreed or, if no time is agreed, at or within a reasonable time. N.Y. U.C.C. Law § 1-204(3).
-Under the Uniform Commercial Code, a “reasonable time” depends on the “nature, purpose and circumstances” of any action which is to be taken. N.Y. U.C.C. Law § 1-204(2).
A seller has recourse to the relief afforded by N.Y. U.C.C. Law § 2-508(2) as long as it can establish that it had reasonable grounds, tested objectively, for its belief that the goods would be accepted. The test of reasonableness, in this context, encompasses the concepts of “good faith” and commercial standards of fair dealing which permeate the Uniform Commercial Code.

CONCLUSION
The court affirmed the order upholding the judgment of the trial court in favor of the oil supplier.

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