J.R. Cousin Industries, Inc. v. Menard, Inc.

127 F. 3d 580 (1997)

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J.R. Cousin Industries, Inc. v. Menard, Inc.

United States Court of Appeals for the Seventh Circuit
127 F. 3d 580 (1997)

  • Written by Mike Begovic, JD

Facts

J. R. Cousin Industries (Cousin) (plaintiff) entered into a contract with Menard, Inc. (defendant) to supply Menard with 20,000 low-cost sinks and toilets that were manufactured by a firm in Mexico. The contract obligated Cousin to credit Menard for sinks and toilets that were defective or that were returned by customers for any reason. Under the contract, Menard was permitted to destroy defective or returned units, because it would have been uneconomical to ship them back to Cousin. After the products were delivered and Menard began subtracting a high amount of credits from its invoices, Cousin requested to inspect the sinks and toilets. Menard initially permitted Cousin to inspect a small fraction of the returned units. Menard then refused to allow further inspections, and it subtracted a total of $72,000 from Cousin’s invoices. Cousin sued in federal district court, alleging that Menard violated Uniform Commercial Code (UCC) § 2-515, which, in furtherance of the adjustment of any claim or dispute, confers upon sellers a right to inspect goods sold. A jury sided with Cousin, but only awarded it $70,000, in consideration of the fact that some of the units were destroyed before Cousin’s request to inspect. However, it was not possible to determine the precise amount. Menard appealed, arguing that the contract authorized it to destroy defective units, and that Cousin waived its rights under UCC § 2-515 by including this provision in the contract. Menard also argued that it would have had to bear the cost of storing the defective units.

Rule of Law

Issue

Holding and Reasoning (Posner, C.J.)

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