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New Jersey Wood Treating Corp. v. Marjam Supply Company, Inc.

A-4683-01T3 (N.J. Super. App. Div. 2003) (Unpublished)

UCC; REMEDIES; REJECTION—Failing to complain about defective products and taking further shipments is inconsistent with a customer’s claim that it has rejected a defective lot of goods.

A wood treating company sued a customer for payment owed for fire resistant wood that it had delivered to its customer. The customer contended that it had rejected the wood because it was defective and that the supplier had failed to cure the defect. Over a period of four or five months, the supplier had delivered fire resistant wood pursuant to a commercial sales contract. In about the middle of that time period, the customer complained, “both orally and in writing, about a powdery substance on the wood.” In its pre-litigation letters, the customer “did not claim that the dust prevented painting and finishing or rendered the wood unusable for its intended purpose in construction.” Also, “it never specifically identified the shipments of wood which allegedly were defective by lot number or otherwise.” Nonetheless, the supplier “retrieved and replaced one truckload” and proceeded to have the wood tested. The supplier’s test showed no problem. The customer then responded by stating it would also have some of the wood tested. “While it ‘remained concerned’ about the matter, [the customer] was ‘pleased’ that the two companies were ‘engaged in a productive and mutually beneficial discussions’ to resolve the issue.” Notwithstanding continued disagreements, the customer made a partial payment. It also continued to accept shipments from the supplier. Based on that, the lower court concluded that there was “no kind of rejection or [] revocation of acceptance.” It thought that if such had been the case, the correspondence between the parties’ respective counsel would have said so. Further, the lower court found no evidence that there was anything about the powder residue that was harmful. It rejected the customer’s argument that the supplier should have mitigated damages, saying “[h]ow do you reconcile that [argument] with the fact that from the time that this alleged dispute started there’s a continuation of delivery, there’s a continuation of the use of the product and there’s non-payment?” For those reasons, the lower court held in favor of the supplier and the Appellate Division agreed, ruling that “while [the customer] complained about the wood, [the supplier] took measures to resolve the problem and [the customer] neither rejected continued shipments nor revoked acceptance thereof.”

The Appellate Division also rejected the customer’s “last minute effort to ward off judgment by way of [a] faxed ‘status report’” that showed that the seller’s corporate charter had been revoked. The seller had closed its business and was dissolving the corporation. “[D]issolved corporations may wind up their business affairs, including prosecuting and defending suits, even though they are unable to continue the businesses for which they were established.”

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