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1983]Uniform Commercial Code579volved application of a legal standard, and therefore the court isnot bound by the clearly erroneous rule. If, as in this case, however, a district court judge applies a correct legal standard and hisconclusion is supported by substantial evidence in the record andis not unreasonable, then the decision should be affirmed. 14The dissent indicated that there was no disagreement among thepanel members as to the interpretation of the notice provision ofV.C.C. section 2-607. The dissenting judge agreed that V.C.C. section 2-607 requires more than notifying the seller that the transaction is troublesome. The majority and dissent part company in answering whether the district judge accepted the sentencepreviously quoted from comment 4 as controlling. The dissent argued that the district court did not rely upon limited commentlanguage and, therefore, did not apply an erroneous legal standard.To the contrary, the dissent emphasized that the district courtcorrectly discussed all of the purposes underlying the notice requirement and evaluated the plaintiff's conduct when taken as awhole as constituting adequate notice of breach. Iii The districtcourt viewed the facts differently from the majority, finding thatthe plaintiff continually complained to the defendant aboutproblems with the TBM. According to the dissent, the districtcourt found the requisite notice of breach in a K & M statement toCalweld's service representative, less than one month after the firstinstallation of the TBM, that K & M intended to hold Calweld14. 669 F.2d at 1119. In so concluding, the dissent stated that giving deference to a trialcourt's application of a correct legal standard recognizes that the lower court is in a betterposition to make evidentiary findings based upon the record presented. Such recognitionpreserves the proper relationship between trial courts and appellate courts. The dissentwent on to quote from Ashland Oil and Refining Co. v. Kenny Construction Co., 395 F.2d683 (6th Cir. 1968), in which the court approved a standard of review of a "mixed finding"that gives deference to the lower court's conclusions:If (the court's determination is] regarded as a mixed finding, the application oflegal principles was involved in making the determination, and it is therefore subject to review free from the clearly erroneous rule. See Taft Broadcasting Co. v.Columbus· Dayton Local, 297 F.2d 149 (6th Cir. 1961); Cordovan Associates, Inc. v.Dayton Rubber Co., 290 F.2d 858 (6th Cir. 1961). Plaintiff does not contend, nordo we find, that the District Court applied an incorrect principle of law to thefact, and while that court's determination is not the only one permissible underthe facts, it is supported by substantial evidence and is not unreasonable. Accordingly, the judgement of the District Court should be affirmed.669 F.2d at 1119 (quoting Ashland Oil, 395 F.2d at 684).15. 669 F.2d at 1121.HeinOnline -- 1983 Det. C.L. Rev. 579 1983

580Detroit College of Law Review[2:575responsible for the breakdowns. 18 The distinction between the district court and Sixth Circuit decisions is the weight given to thisearly statement in informing Calweld of the breach. The problemthus posed by this case for the practitioner is what constitutestimely and reasonable notice from both a counseling and litigationstandpoint.A buyer, who seeks recovery from a seller for a claimed breach ofwarranty, must give the seller prompt notice of his claim. U.C.C.section 2-607 (3)(a) provides that "(3) [w]here a tender has beenaccepted (a) the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller ofbreach or be barred from any remedy." Moreover, inasmuch as section 2-607 operates as a condition precedent to any recovery, theplaintiff bears the burden of proof to show not only that notice wasgiven within a reasonable time,17 but also, that the notice was adequate to inform the defendant he was in breach.What constitutes a reasonable time within which the buyershould have discovered any breach and notified the seller is a frequently litigated question. The cases certainly do not provide aworkable rule or formula. For example, notice after two month hasbeen held unreasonable l8 while notice after two and one-half yearshas been held timely. 19Thus, while case law is not helpful in evaluating timeliness, oneof the policies underlying the notice requirement is particularlyhelpful in predicting how a court· may apply the reasonable timerequirement. so A major reason for requiring notice is that it opensthe way for normal settlement through negotiations, providing anopportunity for the seller to suggest cure and for the buyer to min[d. at 1122.17. Standard Alliance, 587 F.2d at 823, citing Ehlers v. Chrysler Motor Corp., 226N.W.2d 157, 159 (S.D. 1975); Schnabl v. Ford Motor Co., 54 Wis. 2d 354, 198 N.W.2d 161(1972).18. Hays Merchandise, Inc. v. Dewey, 78 Wash. 2d 343, 474 P.2d 270 (1970).19. Lewis v. Mobil Oil Corp., 438 F.2d 500, 508-09 (8th Cir. 1971).20. Treatise authors White and Summers indicate that two other policies behind U.C.C.§ 2-607 can be identified. The second policy is to afford the seller the opportunity to preparefor negotiation and litigation. The third and least important policy "is to give the defendantthat same kind of mind balm he gets from the statute of limitations. There is some value inallowing a seller, at some point, to close his books on goods sold in the past and to pass onto other things." J. WHITE & R. SUMMERS, HANDBOOK OF THE LAW UNDER THE UNIFORMCOMMERCIAL CODE 422 (1980).16.HeinOnline -- 1983 Det. C.L. Rev. 580 1983

1983]Uniform Commercial Code581imize losses. 21 Accordingly, where a buyer is held to have forfeitedCode remedies by failing to give timely notice, the court has generally found bad faith on the part of the buyer. This commercial badfaith is found in the buyer's failure to give seller an opportunity tocure the breach.Timeliness, therefore, may depend completely upon whether thepassage of time increases the damages incurred and whether theseller, with notice of the breach, could have reduced the damagesthrough an opportunity to cure by adjustment or replacement. Applying this standard to K & M Joint Venture, the notice given toCalweld's service representative within one month from first useappears timely; however, the notice given by filing suit seventeenmonths after the first problems were experienced appears inconsistent with the underlying policy considerations and, therefore,untimely.The more difficult question posed by the instant case is determining what constitutes sufficient notice under U.C.C. section 2607. There is a split of authority as to what constitutes adequatenotice. The statutory language merely requires that the buyer "notify the seller of breach or be barred from any remedy."22 No standard of adequacy of notice is provided. Thus, to delineate a standard, courts and commentators have relied upon the officialcomments accompanying the Code provision. Comment 4 to U.C.C.section 2-607 provides in pertinent part:The content of the notification need merely be sufficient to let the sellerknow that the transaction is still troublesome and must be watched.There is no reason to require that the notification which saves thebuyer's rights under this section must include a clear statement of all theobjections that will be relied on by the buyer, as under the section covering statements of defect upon rejection (§2-605). Nor is there reason forrequiring the notification to be a claim for damages or of any threatenedlitigation or other resort to a remedy. The notification which saves thebuyer's rights under this article need only be such as informs the sellerthat the transaction is claimed to involve a breach, and thus opens theway for normal settlement through negotiation.The problem presented is whether the Code drafters intendedU.C.C. section 2-607 to eliminate the technical notice requirementsof its predecessor, section 49 of the Uniform Sales Act. Under sec21.22.[d. at 421.U.C.C. § 2-607(3)(a) (1978).HeinOnline -- 1983 Det. C.L. Rev. 581 1983

582Detroit College of Law Review[2:575tion 49, it was irrelevant whether a seller had actual knowledge ofa non-conforming tender. Instead, the critical question waswhether the seller had been informed that the buyer consideredthe seller to be in breach. In a pre-Code case, therefore, applyingthe Uniform Sales Act provision, Judge Learned Hand presentedthe following standard which was subsequently quoted as authoritative on section 49:The plaintiff replies that the buyer is not required to give notice of whatthe seller already knows, but this confuses two quite different things.The notice "of the breach" required is not of the facts, which the sellerpresumably knows quite as well as, if not better than, the buyer, but ofbuyer's claim that they constitute a breach. The purpose of the notice isto advise the seller that he must meet a claim for damages, as to which,rightly or wrongly, the law requires that he shall have early warning. 28The notice standard developed under section 49 required that thebuyer make a specific claim for damages. Moreover, some jurisdictions required the buyer to specify, in detail, the basis of his claimthat the contract was breached. UClearly, some of the technical requirements of section 49 are dispensed with under the Code provision. As noted in the Code comments, "[t]here is no reason to require that the notification which·saves the buyer's rights under this section must include a clearstatement of all the objections."u Further, the drafters intended toeliminate the technical requirement of a specific claim for damages, stating that "[n]or is there reason for requiring the notification to be a claim for damages or of any threatened litigation orother resort to a remedy."1I8Relying on certain portions of Code comment 4, some courts andcommentators adopted the view that almost any kind of notice ofdissatisfaction is sufficient.17 Clearly the drafters intended a loosetest; a scribbled note on a bit of toilet paper will do. lIS Nor is ascribbled note required. The law seems well established that oral23. American Mfg. Co. v. United States Shipping Board E. F. Corp., 7 F.2d 565, 566 (2dCir. 1925).24. See, e.g., Idzykowski v. Jordon Marsh Co., 279 Mass. 163, 181 N.E. 172, 173 (1932).25. U.C.C. § 2-607 comment 4 (1978).26. [d.27. See, e.g., Lewis v. Mobil Oil Corp., 438 F.2d 500, 509 (8th Cir. 1971); Metro Investment Corp. v. Portland Rd. Lumber Yard, Inc., 263 Ore. 76, 501 P.2d 312 (1972).28. See supra note 20, at 425.HeinOnline -- 1983 Det. C.L. Rev. 582 1983

1983]Uniform Commercial Code583notification satisfies the notice requirement. 29 Some courts have indicated that certain events, such as the seller's representativesviewing the product's inability to properly function,30 are sufficientto constitute notice to the seller.Other courts, however, require something more than the minimalnotification endorsed by the authorities cited above. The focalpoint of jurisdictions requiring a more stringent standard appearsgenerally to be the final sentence in Code comment 4 to U.C.C.section 2-607: "The notification . need only be such as informsthe seller that the transaction is claimed to involve a breach, andthus opens the way for normal settlement through negotiation."The notice must inform the seller that the buyer regards the contract as breached. Courts interpret this as conforming with thestandard established by Judge Learned Hand in 1925 and, thus,indirectly engraft back the flavor of Uniform Sales Act section 49.Eastern Airlines,3l heavily relied upon in K & M Joint Venture, issuch a case.Eastern Airlines involved a series of contracts by which McDonnell Douglas32 agreed to manufacture and sell to Eastern ninetynine jet planes for approximately one-half billion dollars. Althoughvarying in details, all the agreements required McDonnell Douglasto manufacture planes at a stipulated price per aircraft, with eachjet designated for delivery during a particular calendar month.Throughout the duration of the contracts, Eastern Airlines encountered delivery delay problems. Several months after the finaldelivery, Eastern wrote McDonnell Douglas, presenting a claim fordamages resulting from the late deliveries which occurred over theprevious three years. 33 The airline alleged that the delays could not29. See, e.g., Page v. Camper City & Mobile Home Sales, 292 Ala. 562, 297 So.2d 810(1974); Jay v. Zimmerman Co., 327 F. Supp. 1198 (E.D; Mo. 1971); VLN Corp. v. AmericanOffice Equipment Co., 536 P.2d 863 (Colo. App. 1975); Smith v. Butler, 19 Md. App. 467,311 A.2d 813 (1973); Oregon Lumber Co. v. Dwyer Overseas Timber Products Co., 280 Or.437, 571 P.2d 884 (1973).30. See, e.g., Boeing Airplane Co. v. O'Malley, 329 F.2d 585 (8th Cir. 1964).31. See supra note 10 and accompanying text.32. Eastern originally contracted with Douglas Aircraft, Inc., however, during the performance of the contracts, Douglas faced a financial crisis requiring merger with a solventpartner. McDonnell Aircraft Company was selected. After McDonnell infused over sixtyeight million dollars in new funds into Douglas, a merger was consummated, and the newMcDonnell-Douglas Corporation assumed all the obligations and liabilities of the formerDouglas Aircraft Company.33. 532 F.2d at 964. On the average, each of the ninety late planes was delivered eightyHeinOnline -- 1983 Det. C.L. Rev. 583 1983

584Detroit College of Law Review[2:575be deemed excusable under the applicable clause in the agreements. McDonnell Douglas rejected the claim and suit resulted. Ajury awarded Eastern damages of approximately 25 million dollarsand McDonnell Douglas appealed.McDonnell Douglas contended, inter alia, that Eastern hadfailed to give timely and adequate notice of the breaches. The district court ruled against McDonnell Douglas on this issue, holdingthat Eastern need not prove, as a predicate for recovery, that ithad given McDonnell Douglas reasonable and timely notice ofbreach caused by the delivery delays.34 The trial court found thenotice requirement of V.C.C. section 2-607 inapplicable to deliverydays because the seller necessarily has knowledge of this type ofcontract violation. Notice serves no purpose and, accordingly, isunnecessary where a breach is apparent to both parties. 311The Fifth Circuit found error and reversed, ruling that the question of timely and adequate notice under V.C.C. section 2-607should have been submitted to the jury.3S Given the desirable purposes of encouraging compromise and promoting good faith incommercial relations, it is not enough under V.C.C. section 2-607that a seller has knowledge of the facts constituting a non-conforming tender; seller must also be informed that buyer considersseller to be in breach of the contract. The V.C.C. notice requirement is applicable to delivery delays as well as other breaches,thus, the trial court erred in failing to apply the Code provision. 37Alternatively, the trial court ruled that Eastern's notice was bothsufficient and timely as a matter of law. The Fifth Circuit statedthat the adequacy and timeliness of notice typically depends uponthe reasonableness of the buyer's efforts to communicate his dissatisfaction. Thus, the question is particularly within the provinceof the jury. 38The court then discussed Eastern's purported notices. 39 None ofthe purported notices mentioned the word "breach." There wasdays after the month specified in the contract for delivery, for an alleged grand total of7,426 days late.34. Id. at 970.35. Id. at 970-71.36. Id.37. Id. at 973.38. Id.39. Id.HeinOnline -- 1983 Det. C.L. Rev. 584 1983

Uniform Commercial Code19831585also evidence that Eastern publicly praised McDonnell Douglas'performance, which created a question of commercial good faith.Under the circumstances, Eastern may well have led McDonnellDouglas to believe that it was not in breach. Although adequatenotice may have been given by Eastern in an early letter, the courtwas concerned that subsequent actions by Eastern, including positive public statements and the negotiation of new contracts withthe breaching seller, may have dissipated the notice's effect. Accordingly, the court held that the issue of notice should have beensubmitted to the jury to determine whether Eastern's conduct,taken as a whole, constituted adequate and timely notification toMcDonnell Douglas that it was considered to be in breach. 40Relying on the Eastern Airlines case, the Sixth Circuit in K & MJoint Venture found the buyer's conduct in continuing to orderand to pay for repair and replacement parts from Calweld, withoutprotest, while experiencing problems, as inconsistent with K & M'sclaims that Calweld was liable. 41 This "inconsistent behavior"standard, discussed in Eastern Airlines, is troublesome when applied in K & M Joint Venture because of the differences betweenthe cases. In Eastern Airlines, the inconsistent behavior of thebuyer is raised merely as justification for reversal on the basis thatthe issue of no notice was a question of fact. The court found thatthe adequacy or inadequacy of the notice could not be determinedas a question of law; the conflicting evidence created a question forthe trier of fact. In K & M Joint Venture, the trier of fact, thedistrict court judge, weighed the conflicting evidence, the claimedinconsistent behavior of the buyer, and found the notice to be adequate. According to the trier of fact, K & M's conduct subsequentto giving notice did not dissipate the effect of the notice. The reversal in K & M Joint Venture can only be justified on the basisthat there was no support in the record for the trier of fact's conclusion. The dissent found the trier of fact's ultimate finding to besupported by substantial evidence and not unreasonable, althoughalternative findings would have been permissible under the facts.Not having access to the record, this reviewer cannot side withthe majority or the dissent. What is of concern, however, is certainlanguage used in the majority opinion which, at least in flavor, es40. [d. at 979-80.41. 669 F.2d at 1114.HeinOnline -- 1983 Det. C.L. Rev. 585 1983

586Detroit College of Law Review[2:575tablishes a more stringent standard for notice than contemplatedby the Eastern Airlines court. The K & M Joint Venture majorityappeared unnecessarily concerned with the fact that K & M neverfollowed up its complaints with any written notice or any statement to an officer of Calweld, although a service representativehad been informed that K & M intended to hold Calweld responsible for the breakdowns. 4S Further, the Court, in deciding K & MJoint Venture, stressed that the only written communication fromK & M during the entire period was the request for a complete setof drawings to rebuild the TBM.48 It would appear that the SixthCircuit is requiring notice akin to actual notice of a breach of warranty or an outright assertion of legal rights, that is, notice moreappropriate under the Uniform Sales Act provision.Such a stringent standard for notice is not contemplated in theEastern Airlines case. On the contrary, there is no requirementthat notice of breach be of a specific type or employ specific language. Notice may be oral; it may be given in a single communication or derived from several. Notice need not be a specific claim fordamages or an assertion of leg

UNIFORM COMMERCIAL CODE Kathleen E. Paynet I. INTRODUCTION Three Uniform Commercial Code Article 2 and two Article 9 is sues are presented by the commercial transaction cases decided during the survey period between October 1, 1981 to October 1, 1982. The Sixth Circuit Court of Appeals addressed the frequently