The Unlaub Company, Inc. v. Sam Sexton, Jr.
568 F.2d 72, 1977 U.S. App. LEXIS 5538, 23 U.C.C. Rep. Serv. (West) 69 (1977)
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Rule of Law:
Under the Uniform Commercial Code, a buyer's failure to make an effective rejection of goods after the seller has properly tendered them constitutes an acceptance, which entitles the seller to recover the full contract price.
Facts:
- The Unlaub Company, Inc. (Unlaub) entered into a contract to sell coal screen units to the Paul Rees Coal Company (the coal company).
- Sam Sexton, Jr., president of the coal company, signed the contract and also personally guaranteed his company's performance and payment obligations.
- The contract required the coal company to make a down payment and pay the remaining balance of $54,177.00 upon receiving notice from Unlaub that the goods were available for pickup at the manufacturer's factory in Durand, Michigan.
- The coal company paid the required down payment.
- On July 22, 1975, after previous telephone calls, Unlaub sent Sexton a registered letter notifying him that the coal screen units were ready for pickup at the factory.
- The coal company never paid the remaining balance, never picked up the units, and never notified Unlaub that it was rejecting the goods.
Procedural Posture:
- The Unlaub Company, Inc. filed a diversity action against Sam Sexton, Jr. in the United States District Court for the Western District of Arkansas to recover the unpaid balance on a contract Sexton had personally guaranteed.
- Unlaub filed a motion for summary judgment.
- The district court granted summary judgment in favor of Unlaub for the full amount claimed, $54,177.00.
- Sexton, the defendant, appealed the district court's judgment to the United States Court of Appeals for the Eighth Circuit.
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Issue:
Does a buyer's failure to notify a seller of rejection, after receiving proper notice that the contract goods are available for pickup, constitute an acceptance of the goods under the Uniform Commercial Code, thereby entitling the seller to recover the full unpaid contract price?
Opinions:
Majority - Van Oosterhout
Yes, a buyer's failure to effectively reject goods after proper tender constitutes an acceptance that obligates the buyer to pay the full contract price. The court's reasoning follows a direct application of the Uniform Commercial Code (UCC). First, under UCC § 2-503(1), Unlaub made a proper 'tender of delivery' by notifying the coal company, as per the contract, that the conforming goods were available for pickup. Second, under UCC § 2-602(1), an effective 'rejection of goods' must be made within a reasonable time after tender and requires the buyer to seasonably notify the seller. The record is devoid of any evidence that the coal company or Sexton ever notified Unlaub of a rejection. Third, under UCC § 2-606(1)(b), an 'acceptance of goods' occurs when the buyer fails to make an effective rejection after having a reasonable opportunity to inspect them. Because the coal company failed to reject the goods after proper tender, it is deemed to have accepted them. Therefore, pursuant to UCC § 2-709(1)(a), Unlaub is entitled to recover the full unpaid price of the accepted goods.
Analysis:
This case serves as a straightforward application of the UCC's framework for tender, acceptance, and rejection, clarifying the consequences of a buyer's inaction. The holding solidifies the principle that acceptance can occur by default through a failure to reject, rather than requiring an affirmative act by the buyer. This provides sellers with a powerful remedy—an action for the entire contract price under § 2-709(1)(a)—for accepted goods, relieving them of the burden to resell the goods and sue for damages. It underscores the importance for buyers to communicate a clear and timely rejection if they do not intend to take possession of tendered goods.
