2018 New Mexico Statutes
Chapter 55 - Uniform Commercial Code
Article 2 - Sales
Section 55-2-607 - Effect of acceptance; notice of breach; burden of establishing breach after acceptance; notice of claim or litigation to person answerable over.

(1) The buyer must pay at the contract rate for any goods accepted.

(2) Acceptance of goods by the buyer precludes rejection of the goods accepted and if made with knowledge of a nonconformity cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured but acceptance does not of itself impair any other remedy provided by this article for nonconformity.

(3) Where a tender has been accepted:

(a) the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy; and

(b) if the claim is one for infringement or the like (Subsection (3) of Section 2-312 [55-2-312 NMSA 1978]) and the buyer is sued as a result of such a breach, he must so notify the seller within a reasonable time after he receives notice of the litigation or be barred from any remedy over for liability established by the litigation.

(4) The burden is on the buyer to establish any breach with respect to the goods accepted.

(5) Where the buyer is sued for breach of a warranty or other obligation for which his seller is answerable over:

(a) he may give his seller written notice of the litigation. If the notice states that the seller may come in and defend and that if the seller does not do so he will be bound in any action against him by his buyer by any determination of fact common to the two litigations, then, unless the seller after seasonable receipt of the notice does come in and defend, he is so bound;

(b) if the claim is one for infringement or the like (Subsection (3) of Section 2-312 [55-2-312 NMSA 1978]), the original seller may demand in writing that his buyer turn over to him control of the litigation including settlement or else be barred from any remedy over and if he also agrees to bear all expense and to satisfy any adverse judgment, then, unless the buyer after seasonable receipt of the demand does turn over control, the buyer is so barred.

(6) The provisions of Subsections (3), (4) and (5) apply to any obligation of a buyer to hold the seller harmless against infringement or the like (Subsection (3) of Section 2-312 [55-2-312 NMSA 1978]).

History: 1953 Comp., § 50A-2-607, enacted by Laws 1961, ch. 96, § 2-607.

OFFICIAL COMMENTS

UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.

Prior uniform statutory provision. — Subsection (1) - Section 41, Uniform Sales Act; Subsections (2) and (3) - Sections 49 and 69, Uniform Sales Act.

Changes. — Rewritten.

Purposes of changes. — To continue the prior basic policies with respect to acceptance of goods while making a number of minor though material changes in the interest of simplicity and commercial convenience so that:

1. Under Subsection (1), once the buyer accepts a tender the seller acquires a right to its price on the contract terms. In cases of partial acceptance, the price of any part accepted is, if possible, to be reasonably apportioned, using the type of apportionment familiar to the courts in quantum valebat cases, to be determined in terms of "the contract rate," which is the rate determined from the bargain in fact (the agreement) after the rules and policies of this article have been brought to bear.

2. Under Subsection (2) acceptance of goods precludes their subsequent rejection. Any return of the goods thereafter must be by way of revocation of acceptance under the next section. Revocation is unavailable for a non-conformity known to the buyer at the time of acceptance, except where the buyer has accepted on the reasonable assumption that the non-conformity would be seasonably cured.

3. All other remedies of the buyer remain unimpaired under Subsection (2). This is intended to include the buyer's full rights with respect to future installments despite his acceptance of any earlier non-conforming installment.

4. The time of notification is to be determined by applying commercial standards to a merchant buyer. "A reasonable time" for notification from a retail consumer is to be judged by different standards so that in his case it will be extended, for the rule of requiring notification is designed to defeat commercial bad faith, not to deprive a good faith consumer of his remedy.

The content of the notification need merely be sufficient to let the seller know that the transaction is still troublesome and must be watched. There is no reason to require that the notification which saves the buyer's rights under this section must include a clear statement of all the objections that will be relied on by the buyer, as under the section covering statements of defects upon rejection (Section 2-605). Nor is there reason for requiring the notification to be a claim for damages or of any threatened litigation or other resort to a remedy. The notification which saves the buyer's rights under this article need only be such as informs the seller that the transaction is claimed to involve a breach, and thus opens the way for normal settlement through negotiation.

5. Under this article various beneficiaries are given rights for injuries sustained by them because of the seller's breach of warranty. Such a beneficiary does not fall within the reason of the present section in regard to discovery of defects and the giving of notice within a reasonable time after acceptance, since he has nothing to do with acceptance. However, the reason of this section does extend to requiring the beneficiary to notify the seller that an injury has occurred. What is said above, with regard to the extended time for reasonable notification from the lay consumer after the injury is also applicable here; but even a beneficiary can be properly held to the use of good faith in notifying, once he has had time to become aware of the legal situation.

6. Subsection (4) unambiguously places the burden of proof to establish breach on the buyer after acceptance. However, this rule becomes one purely of procedure when the tender accepted was non-conforming and the buyer has given the seller notice of breach under Subsection (3). For Subsection (2) makes it clear that acceptance leaves unimpaired the buyer's right to be made whole, and that right can be exercised by the buyer not only by way of cross-claim for damages, but also by way of recoupment in diminution or extinction of the price.

7. Subsections (3) (b) and (5) (b) give a warrantor against infringement an opportunity to defend or compromise third-party claims or be relieved of his liability. Subsection (5) (a) codifies for all warranties the practice of voucher to defend. Compare Section 3-803. Subsection (6) makes these provisions applicable to the buyer's liability for infringement under Section 2-312.

8. All of the provisions of the present section are subject to any explicit reservation of rights.

Point 1: Section 1-201.

Point 2: Section 2-608.

Point 4: Sections 1-204 and 2-605.

Point 5: Section 2-318.

Point 6: Section 2-717.

Point 7: Sections 2-312 and 3-803.

Point 8: Section 1-207.

"Burden of establishing". Section 1-201.

"Buyer". Section 2-103.

"Conform". Section 2-106.

"Contract". Section 1-201.

"Goods". Section 2-105.

"Notifies". Section 1-201.

"Reasonable time". Section 1-204.

"Remedy". Section 1-201.

"Seasonably". Section 1-204.

Comparative liability is not part of the UCC under this section. Bowlin's, Inc. v. Ramsey Oil Co., 1983-NMCA-038, 99 N.M. 660, 662 P.2d 661, cert. denied, 99 N.M. 644, 662 P.2d 645.

The purpose of the requirement of notice to the seller of a breach of warranty is to enable the seller to minimize damages in some manner, if possible to correct the defect, and also to give the seller some immunity against stale claims. O'Shea v. Hatch, 1982-NMCA-013, 97 N.M. 409, 640 P.2d 515.

No notice of intent to claim damages. — When a tender has been accepted, the buyer must, within a reasonable time after he discovers or should have discovered any breach, notify the seller or be barred from any remedy. There is no requirement that the buyer also notify the seller of an intent to claim damages for the breach. State ex rel. Concrete Sales & Equip. Rental Co. v. Kent Nowlin Constr., Inc., 1987-NMSC-114, 106 N.M. 539, 746 P.2d 645.

Notification of breach may be oral or written. — Notification of a breach of warranty may be either oral or in writing and is sufficient if it is informative to the seller of the general nature of the difficulty encountered with the warranted goods. O'Shea v. Hatch, 1982-NMCA-013, 97 N.M. 409, 640 P.2d 515.

Buyer must give notice within "reasonable time". — After a buyer has determined that there has been a breach of warranty relating to the property sold, the buyer must give notice to the seller within a "reasonable time" after he discovers or should have discovered the breach, to avoid liability for the sale. O'Shea v. Hatch, 1982-NMCA-013, 97 N.M. 409, 640 P.2d 515.

Sufficiency and timeliness of notice are questions of fact. — The sufficiency of notice and what is considered a reasonable time within which to give notice of a breach of warranty are ordinarily questions of fact, based upon the circumstances of each case. O'Shea v. Hatch, 1982-NMCA-013, 97 N.M. 409, 640 P.2d 515.

Three-year delay in providing notice of breach of warranty was not reasonable. — Where plaintiff, who worked as a tree trimmer, purchased work boots from defendant that purported to meet acceptable occupational safety and health administration standards, and after wearing the boots for several months, a piece of rubber on the sole of the boots became unglued, and while at work cutting down dead tree limbs, the unglued shoe piece got caught on debris, causing plaintiff to fall, drop a log on himself, and injure his back, summary judgment for defendant was appropriate where plaintiff knew about the role his boots played in his accident but waited over three years to provide notice of defendant's breach of warranty. Where there was no justification for waiting three years to provide notice, plaintiff failed to meet his burden of proving that adequate notice of the claim was provided to defendant, and therefore his claim for breach of warranty was barred. Badilla v. Wal-Mart Stores East, Inc., 2017-NMCA-021, cert. denied.

Reasonable to require loss claims to be made within two days. — In general, a contract provision requiring claims of loss to be made within two days of delivery is reasonable, lawful and not unconscionable. Bowlin's, Inc. v. Ramsey Oil Co., 1983-NMCA-038, 99 N.M. 660, 662 P.2d 661, cert. denied, 99 N.M. 644, 662 P.2d 645.

Acceptance of partial shipment. — Notice is not a condition precedent to the remedy of "cover" for failure to make a complete delivery. Not until the buyer accepts a complete tender must he, within a reasonable time after he discovers or should have discovered any breach, notify the seller of a breach or be barred from any remedy. A buyer's mere acceptance of partial goods does not waive or otherwise affect his right to damages for the seller's failure to deliver the remainder under the contract of sale. State ex rel. Concrete Sales & Equip. Rental Co. v. Kent Nowlin Constr., Inc., 1987-NMSC-114, 106 N.M. 539, 746 P.2d 645.

Law reviews. — For article, "Buyers and Sellers of Goods in Bankruptcy," see 1 N.M. L. Rev. 435 (1971).

For annual survey of New Mexico law relating to commercial law, see 13 N.M.L. Rev. 293 (1983).

Am. Jur. 2d, A.L.R. and C.J.S. references. — 63 Am. Jur. 2d Products Liability § 525.

Effect of stipulation for return of advance payment, if order is not accepted, 1 A.L.R. 1513.

Judgment against seller of chattels for breach of warranty as conclusive upon prior warrantor, 8 A.L.R. 667.

Right of purchaser to opportunity to pay in cash where tender has been made in other medium, 11 A.L.R. 811, 23 A.L.R. 630, 46 A.L.R. 914.

Liability of seller of article not inherently dangerous for personal injuries to the buyer due to the defective or dangerous condition of the article, 13 A.L.R. 1176, 74 A.L.R. 343, 168 A.L.R. 1054.

Right of dealer against his vendor in case of breach of warranty as to article purchased for resale and resold, 22 A.L.R. 133, 64 A.L.R. 883.

Right of seller to ship goods after notice of repudiation by buyer, 27 A.L.R. 1230.

Loss of profits as element of damages for fraud of seller as to quality of goods purchased for resale, 28 A.L.R. 354.

Rights and remedies of purchaser under seller's agreement to assist him in reselling the goods, 29 A.L.R. 666.

Applicability of provision in contract of sale for return of article, where article delivered does not answer to description, 30 A.L.R. 321.

Automobile or truck, right of action for breach of warranty, 34 A.L.R. 549, 43 A.L.R. 648.

Effect of action as an election of remedy or choice of substantive rights in case of fraud in sale of property, 35 A.L.R. 1153, 123 A.L.R. 378.

Liability of seller of serum or vaccine matter for use on livestock for defects in quality thereof, 39 A.L.R. 399.

Right of seller as condition of delivery to insist on payment or resort to means not provided by contract to assure payment, 44 A.L.R. 443.

Misrouting as affecting duty of the buyer to accept goods, 46 A.L.R. 1120.

What constitutes delivery of goods sold under C.I.F. contracts, 47 A.L.R. 193.

Contract requiring seller to look to property alone for payment, 50 A.L.R. 714.

Factor's failure to account for proceeds of sale as affecting rights of seller and purchaser inter se, 50 A.L.R. 1301.

Reserving to seller right to demand cash or security, if buyer's credit or financial responsibility becomes impaired, 64 A.L.R. 1117.

Acceptance after agreed time of delivery as waiver of damages on account of seller's delay, 80 A.L.R. 322.

Effect of express provision of contract limiting obligation in case of breach of warranty to replacement of defective article or part under Uniform Sales Act, 106 A.L.R. 1466.

Breach of warranty as to title, as within statutory provision requiring notice of breach of warranty on sale of goods, 114 A.L.R. 707.

Insolvency of buyer as justifying seller on credit in refusing to deliver except for cash, 117 A.L.R. 1105.

Sufficiency of buyer's attempt to rescind, 118 A.L.R. 530.

Duty of seller to tender delivery where buyer has not exercised his option under contract to require shipment before time specified, 119 A.L.R. 1495.

Purchaser's remedy for personal injury due to defective or dangerous condition of purchased article not inherently dangerous, 168 A.L.R. 1054.

Buyer's acceptance of part of goods as affecting right to damages for failure to complete delivery, 169 A.L.R. 595.

What amounts to acknowledgment by third person that he holds goods on buyer's behalf within statutory provision respecting delivery when goods are in possession of third person, 4 A.L.R.2d 213.

Seller's right to retain down payment on buyer's unjustified refusal to accept goods, 11 A.L.R.2d 701.

Seller's waiver of sales contract provision limiting time within which buyer may object to or return goods or article for defects or failure to comply with warranty or representations, 24 A.L.R.2d 717.

Buyer's acceptance of delayed or defective installment of goods as waiver of similar default as to later installments, 32 A.L.R.2d 1117.

Purchaser's use or attempted use of articles known to be defective as affecting damages recoverable for breach of warranty, 33 A.L.R.2d 511.

Time within which buyer of goods must give notice in order to recover damages for seller's breach of express warranty, 41 A.L.R.2d 812.

Use of article by buyer as waiver of right to rescind for fraud, breach of warranty or failure of goods to comply with contract, 41 A.L.R.2d 1173.

In absence of written provision and sales contract, place where cash consideration for goods purchased is payable, 49 A.L.R.2d 1350.

Third-party beneficiaries of warranties under U.C.C. § 2-318, 100 A.L.R.3d 743.

Extent of liability of seller of livestock infected with communicable disease, 14 A.L.R.4th 1096.

Necessity that buyer of goods give notice of breach of warranty to manufacturer under UCC § 2-607, requiring notice to seller of breach, 24 A.L.R.4th 277.

Products liability: seller's right to indemnity from manufacturer, 79 A.L.R.4th 278.

Third-party beneficiaries of warranties under UCC § 2-318, 50 A.L.R.5th 327.

Sufficiency and timeliness of buyer's notice under UCC § 607(3)(a) of seller's breach of warranty, 89 A.L.R.5th 319.

77A C.J.S. Sales § 189 et seq.