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

Brief Fact Summary.

Plaintiff sued Defendant after Defendant rejected Plaintiff’s offer to cure a defect in the shipment of oil, which Plaintiff reasonably believed conformed to the contract terms. The trial court ruled in favor of Plaintiff. Defendant appealed.

Synopsis of Rule of Law.

Where the buyer rejects a non-conforming tender which the seller had reasonable grounds to believe would be acceptable, the seller may if he reasonably notifies the buyer have a further reasonable time to substitute a conforming tender.

Facts.

T.W. Oil, Inc. (Plaintiff) purchased a cargo of oil, the sulfur content of which was represented as no greater than 1%. While the shipment was en route, Plaintiff received a certificate from the refinery at which the oil had been processed identifying the sulfur content as 0.52%. Plaintiff then entered into a contract with Consolidated Edison Co. (Defendant) for sale of the oil. The contract listed the sulfur content at 0.5%. Plaintiff also learned that Defendant was authorized to use oil with a sulfur content of up to 1%. When the shipment arrived, testing revealed the sulfur content as 0.92%, and Defendant rejected the shipment. When negotiations to adjust the price failed, Plaintiff offered to cure the defect with a conforming shipment, but Defendant rejected the offer, and Plaintiff sued for breach of contract. The trial court ruled in favor of Plaintiff. Defendant appealed.

Issue.

Whether 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.

Held.

Yes. The trial court’s ruling is affirmed. Where the buyer rejects a non-conforming tender which the seller had reasonable grounds to believe would be acceptable, the seller may if he reasonably notifies the buyer have a further reasonable time to substitute a conforming tender.

Discussion.

The UCC creates an exception to the perfect tender rule in section 2-508, which provides that where the buyer rejects a non-conforming tender which the seller had reasonable grounds to believe would be acceptable, the seller may if he reasonably notifies the buyer have a further reasonable time to substitute a conforming tender. The trial court was correct in determining that Plaintiff satisfied this standard. Defendant, the buyer, had rejected the non-conforming tender. Plaintiff, however, had reasonable grounds to believe its tender would be acceptable, as the certificate from the refinery stated the sulfur content was 0.52%, and even if Plaintiff had known that the sulfur content was 0.92% it could have reasonably believed that Defendant would have accepted the oil as it was authorized to burn oil with sulfur content of up to 1%. Finally, Plaintiff promptly notified Defendant of its intention to cure the defect through a substitute shipment.