Colorado § 4-2-608 - Revocation of acceptance in whole or in part.

§ 4-2-608. Revocation of acceptance in whole or in part.

(1) The buyer may revoke his acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to him if he has accepted it:

(a) On the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or

(b) Without discovery of such nonconformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller's assurances.

(2) Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. It is not effective until the buyer notifies the seller of it.

(3) A buyer who so revokes has the same rights and duties with regard to the goods involved as if he had rejected them.

Source: L. 65: p. 1330, § 1. C.R.S. 1963: § 155-2-608.

ANNOTATION

I. General Consideration.

II. Buyer May Revoke Acceptance.

III. Reasonable Time.

IV. Same as if Goods Rejected.

I. GENERAL CONSIDERATION.

Annotator's note. Since § 4-2-608 is similar to repealed § 121-1-69 (1)(e), (3), (4), and (5), C.R.S. 1963, § 121-1-69 (1)(e), (3), (4), and (5), CRS 53, and CSA, C. 143A, §§ 69(1)(e), (3), (4), and (5) (uniform sales act), relevant cases construing those provisions have been included in the annotations to this section.

Notice of revocation of acceptance is a recognition by buyer that property belongs to seller. Stroh v. Am. Recreation & Mobile Home Corp., 35 Colo. App. 196, 530 P.2d 989 (1975).

Buyer's counterclaim properly treated as claim to revoke acceptance. A buyer's counterclaim requesting, inter alia, rescission of the contract was properly treated as a claim to revoke acceptance as provided for in this section. Moeller Mfg., Inc. v. Mattis, 33 Colo. App. 300, 519 P.2d 1218 (1974).

Recovery of purchase price by buyer could not be upheld on theory that buyer had revoked acceptance where sole theory of recovery at trial was based on fraud. Wagner v. Dan Unfug Motors, Inc., 35 Colo. App. 102, 529 P.2d 656 (1974).

Applied in Eccher v. Small Bus. Admin., 643 F.2d 1388 (10th Cir. 1981); Glen Peck, Ltd. v. Fritsche, 651 P.2d 414 (Colo. App. 1981).

II. BUYER MAY REVOKE ACCEPTANCE.

Where a seller of chattels is guilty of a breach of an implied warranty of title, and the purchaser relying upon such warranty has sold or disposed of a minor portion of the chattels, the purchaser, upon learning of the defect of title, may elect to rescind the entire transaction. Koscove v. Brunger, 143 Colo. 354, 352 P.2d 961 (1960); Rudd v. Rogerson, 162 Colo. 103, 424 P.2d 776 (1967).

False representation of material fact, even though innocently made, may merit rescission of a contract or revocation of acceptance. Keen v. Modern Trailer Sales, Inc., 40 Colo. App. 527, 578 P.2d 668 (1978).

Buyer's duty to investigate. A buyer may not revoke acceptance based upon defects which were not known to him at the time of acceptance because of his own failure to make a reasonable investigation which was readily available. Hummel v. Skyline Dodge, Inc., 41 Colo. App. 572, 589 P.2d 73 (1978).

Acceptance of nonconforming articles may be revoked. Revocation of acceptance may occur when the article specified in the contract is so nonconforming that its value to the buyer is substantially impaired. Regents of Univ. of Colo. v. Pac. Pump & Supply, Inc., 35 Colo. App. 36, 528 P.2d 941 (1974).

Buyer may revoke his acceptance of a commercial unit where the nonconformity of the unit substantially impaired its value and the revocation was made in a timely manner. Homier v. Faricy Truck & Equipment Co., 784 P.2d 798 (Colo. App. 1988).

Nonconformity cannot be viewed as a question of the quantity and quality of goods alone, but of the performance of the totality of the seller's contractual undertaking. Regents of Univ. of Colo. v. Pac. Pump & Supply, Inc., 35 Colo. App. 36, 528 P.2d 941 (1974).

Question of impairment under this section turns upon whether the nonconformity is such as will in fact cause a substantial impairment of value to the buyer, regardless of the seller's knowledge of buyer's needs and circumstances. Stroh v. Am. Recreation & Mobile Home Corp., 35 Colo. App. 196, 530 P.2d 989 (1975).

In determining whether goods are substantially impaired, reference must be made to the effect of the goods' nonconformities upon the particular buyer asserting a right of revocation. Jackson v. Rocky Mtn. Datsun, Inc., 693 P.2d 391 (Colo. App. 1984).

Buyer must be able to transfer unencumbered title. In order to exercise the remedy of revocation after acceptance, the buyer must, as of the date seller offers to return the purchase price and expenses, or if seller makes no such offer, as of the date the trial court awards buyer this remedy, be in a position to transfer an unencumbered title to the seller. Moeller Mfg., Inc. v. Mattis, 33 Colo. App. 300, 519 P.2d 1218 (1974).

There is no requirement under the provisions of the UCC that on revocation of acceptance a buyer must deliver title to the goods to the seller. Under § 4-2-711 (3), a buyer retains a security interest in goods in his possession for any payment made on their price and may resell the goods in the same manner as an aggrieved seller. And, where a buyer does not exercise his right of resale, generally all that is required is that the buyer assign to the seller all of his interest in the goods. Jackson v. Rocky Mtn. Datsun, Inc., 693 P.2d 391 (Colo. App. 1984).

Remedy is for damages under § 4-2-714. When the buyer has encumbered the title and is not able effectively to transfer the goods to the seller, then buyer's remedy is for damages pursuant to § 4-2-714. Moeller Mfg., Inc. v. Mattis, 33 Colo. App. 300, 519 P.2d 1218 (1974).

Buyer vested with security interest upon revocation. If a revocation of acceptance of a mobile home is justifiable under this section, § 4-2-711 (3) vests the buyer with a security interest in the home, and such an interest authorizes continued possession to preserve the collateral, pursuant to § 4-9-207 (1) and (4), subject to the seller's right to an offset for the rental value of the home. Keen v. Modern Trailer Sales, Inc., 40 Colo. App. 527, 578 P.2d 668 (1978).

Buyer may revoke acceptance if he accepts goods on the reasonable assumption that a nonconformity will be cured by the seller and the nonconformity is not "seasonably cured". Buyer is not required to provide the seller with an unlimited number of opportunities to cure a nonconformity before revoking acceptance. Jackson v. Rocky Mtn. Datsun, Inc., 693 P.2d 391 (Colo. App. 1984).

When the buyer reaccepts goods with the understanding that the seller will cure the defect, the buyer must then afford the seller an opportunity to cure the defect before revoking acceptance or claiming a breach of warranty. Ranta Constr., Inc. v. Anderson, 190 P.3d 835 (Colo. App. 2008).

Buyer was not required to set out in detail the car's nonconformities in her notice of revocation where the buyer had repeatedly notified the dealer of the defective performance of the car and the dealer had made repeated attempts to repair it. Jackson v. Rocky Mtn. Datsun, Inc., 693 P.2d 391 (Colo. App. 1984).

Contrary to trial court's determination, there is no "formal notice of revocation" requirement under this section, nor does it exist under § 4-2-607. This section does not require that a revocation of acceptance assume any particular format, but rather that the content of the notice be determined by "considerations of good faith, prevention of surprise, and reasonable adjustment." The notice of revocation, to be sufficient, should fairly apprise the seller that the buyer wants to give back the goods and receive a substitute or money in return. Here, letter that described in detail dryers' alleged defects, attempted to reject acceptance of the dryers, demanded that seller remove the machines from the premises, and requested that damages be paid to buyer and the laundromat owner provided adequate notice of revocation. Cissell Mfg. Co. v. Park, 36 P.3d 85 (Colo. App. 2001).

To prove a valid revocation of acceptance, a buyer must show, among other things, that the goods were nonconforming. Determination of an item's nonconformity hinges on whether it substantially impairs its value to the buyer. Whether goods are nonconforming requires reference to the terms of the contract and the law of warranty. If the goods are contracted for and as warranted, they cannot be nonconforming. Cissell Mfg. Co. v. Park, 36 P.3d 85 (Colo. App. 2001).

III. REASONABLE TIME.

Rescission must be timely and exercised with dispatch upon discovery of the grounds giving rise to the right. Eggen v. M. & K. Trailers, 29 Colo. App. 177, 482 P.2d 435 (1971).

For revocation to be effective, it must occur within a reasonable time. Regents of Univ. of Colo. v. Pac. Pump & Supply, Inc., 35 Colo. App. 36, 528 P.2d 941 (1974); Graham Hydraulic v. Stewart & Stevenson, 797 P.2d 835 (Colo. App. 1990).

What constitutes a reasonable time depends upon the facts of the particular case. Eggen v. M. & K. Trailers, 29 Colo. App. 177, 482 P.2d 435 (1971).

What is a "reasonable time" during which a buyer can revoke his acceptance is a question of fact to be measured by all the circumstances of the case. Stroh v. Am. Recreation & Mobile Home Corp., 35 Colo. App. 196, 530 P.2d 989 (1975).

Determination of reasonableness of time for revocation is one of fact, to be made on the unique circumstances of each case. Four Sons Bakery v. Dulman, 542 F.2d 829 (10th Cir. 1976).

Sellers cannot complain that rescission is untimely when the delay is caused by their own procrastination and refusal to honor their commitments. Eggen v. M. & K. Trailers, 29 Colo. App. 177, 482 P.2d 435 (1971).

Delay on the part of the buyer will be excused in exercising his right to rescind if it is due to the promises of the seller that the defect will be remedied, or to his requests that further trial be made, or to other acts or declarations of the seller tending to induce delay. Eggen v. M. & K. Trailers, 29 Colo. App. 177, 482 P.2d 435 (1971).

There is a distinction between notice of breach under § 4-2-607(3) and notice of revocation of acceptance under § 4-2-608(2). Irrigation Motor & Pump Co. v. Belcher, 29 Colo. App. 343, 483 P.2d 980 (1971).

Where a buyer gives seller an opportunity to repair an item and withholds revoking acceptance until it became apparent that seller cannot or will not perform its contract, then under such circumstances, a delay in the notice in no way prejudices the seller and is not unreasonable. Irrigation Motor & Pump Co. v. Belcher, 29 Colo. App. 383 P.2d 980 (1971). See Duncan v. Bd. of County Comm'rs, 154 Colo. 447, 391 P.2d 368 (1964).

Buyer was justified in withholding revocation of acceptance until it was apparent that the seller could not perform its obligations under the contract. Regents of Univ. of Colo. v. Pac. Pump & Supply, Inc., 35 Colo. App. 36, 528 P.2d 941 (1974).

Where purchaser kept an automobile and drove it for almost a year after his offer to return it to seller for purchase price and incidental expenses was refused, he lost his right to rescind and recover the full purchase price. Elwood Edwards Auto Sales v. Kinsey, 123 Colo. 52, 225 P.2d 59 (1950).

Delay of one year from date of purchase to date of revocation of acceptance held reasonable. Stroh v. Am. Recreation & Mobile Home Corp., 35 Colo. App. 196, 530 P.2d 989 (1975).

Purchaser's occupancy of mobile home during pendency of suit for rescission does not affect the legitimacy of an attempted revocation of acceptance. Keen v. Modern Trailer Sales, Inc., 40 Colo. App. 527, 578 P.2d 668 (1978).

IV. SAME AS IF GOODS REJECTED.

A rescission renders the contract a nullity, and the parties are put in the position they were in immediately prior to entering into the contract. Eggen v. M. & K. Trailers, 29 Colo. App. 177, 482 P.2d 435 (1971).

Same duties and obligations as if rejected before acceptance. Buyer who asserts a right to revoke acceptance has the same duties and obligations as a buyer who asserts a right to reject the goods before acceptance. Moeller Mfg., Inc. v. Mattis, 33 Colo. App. 300, 519 P.2d 1218 (1974); Stroh v. Am. Recreation & Mobile Home Corp., 35 Colo. App. 196, 530 P.2d 989 (1975).

After rejection of goods, any exercise of ownership rights is considered wrongful as against the seller. Moeller Mfg., Inc. v. Mattis, 33 Colo. App. 300, 519 P.2d 1218 (1974).

Purpose of this requirement is to insure that the seller may regain possession of the goods in order to resell the same and minimize his loss. Moeller Mfg., Inc. v. Mattis, 33 Colo. App. 300, 519 P.2d 1218 (1974).

After revocation buyer holds goods as bailee. Where a buyer is entitled to rescind the sale and elects to do so, the buyer shall thereafter be deemed to hold the goods as a bailee for the seller. Stroh v. Am. Recreation & Mobile Home Corp., 35 Colo. App. 196, 530 P.2d 989 (1975).

Buyer becomes liable for the value of their use. If the buyer after revocation of acceptance uses the goods while he holds them as a bailee, he becomes liable for the value of that use. Stroh v. Am. Recreation & Mobile Home Corp., 35 Colo. App. 196, 530 P.2d 989 (1975).

Deterioration of goods' condition not basis for denying revocation. Deterioration in condition of the goods occurring during the period when seller was attempting to cure defects is not a basis for denying buyer's remedy of revocation. Moeller Mfg., Inc. v. Mattis, 33 Colo. App. 300, 519 P.2d 1218 (1974).

Where the buyer utilizes the goods as security for a loan which remains unpaid after revocation, this prevents the seller, upon refund of the purchase price and expenses, from reselling the goods to minimize his loss. Moeller Mfg., Inc. v. Mattis, 33 Colo. App. 300, 519 P.2d 1218 (1974).