KELSEY v. J. W. RINGROSE NET CO.

(Supreme Court of Wisconsin, 1913. 152 Wis. 499, 140 N. W. 66.) Action by George W. Kelsey, Junior, against the J. W. Ringrose Net Company. Judgment for defendant, and plaintiff appeals. Affirmed.

The plaintiff purchased from the defendant a power-driven tipping machine, which was calculated to automatically place metal tips on the ends of the strands of horse fly nets, which plaintiff was engaged in manufacturing. The purchase price of the machine was paid in advance, and the plaintiff endeavored for a considerable length of time to operate it, and finding that it would not work satisfactorily, tendered the machine to the defendant, and gave notice that he elected to rescind the contract to purchase. This action was brought to recover the purchase price. The court directed a verdict in favor of the defendant, and from the judgment entered in accordance with such ruling the plaintiff appeals.

BARNES, J. *

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The machine involved was built for a special purpose. There were only about a half a dozen such machines in use when the plaintiff made his purchase. It was not sold under any express warranty. It is settled in this state that under such circumstances the law implies a warranty that the machine will do the work which it was intended to do.

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Where such an article is sold without express warranty, the purchaser has a reasonable time within which to test it, for the purpose of determining whether or not it complies with the warranty which the law implies. If it does not, he has an election of remedies. He may affirm the contract and recover the legitimate damage occasioned by the breach of the warranty, or he may rescind the contract and tender back the article and recover the purchase price, if it has been paid. If it has not, he may successfully defend an action to recover it.

The cases last cited further hold that what is a reasonable time within which to make a test is usually a question of fact for a jury to decide, but that the time may be so long that a court can and should say, as a matter of law, that it was not made within a reasonable time. As a corollary to what has already been said, it is held that, where the defects are such that the purchaser, in the exercise of ordinary care, should have discovered them, it is his duty to do so; and that failure to observe such duty and to rescind with reasonable promptness will defeat the right of rescission. * * *

Any use of an article purchased under an implied warranty, after it has been ascertained that it does not fulfill such warranty, and which is not made for the purpose of testing, is an acceptance of the article and a waiver of the right to rescind.

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After it is ascertained that the article does not comply with the warranty, timely notice must be given that it will not be accepted as a compliance with the contract, or the right to rescind is waived.

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In a case involving a sale of vanilla, it was held that only so much of it should be used for testing purposes as was fairly and reasonably necessary; and that where an excessive quantity was used the right of rescission was lost. Zipp Mfg. Co. v. Pastorino, 120 Wis. 176, 97 N. W. 904.

The concrete question before us is: Did the court err in not allowing the jury to say whether the offer to rescind was made within a reasonable time, in view of the principles of law above referred to?

The plaintiff used the machine all, or nearly all, of the month_of December. During that time he could not get it to work properly. Indeed, he says he did not succeed in putting tips on a single fly net with it that he would place on the market. He then returned it to the maker, who was also a manufacturer of fly nets. It showed evidences of hard, though, no doubt, well meant, usage. It also showed evidences that it had been experimented with, even to the extent of putting a set screw in an oil hole in the loose pulley. Defendant overhauled and adjusted it, and set it up in its factory and ran it for some time and returned it, according to the evidence, in first-class condition. It was set up in plaintiff's factory as early as February 6th, and was thereafter tested. until March 25th, according to plaintiff's evidence. At no time did it. do any satisfactory work, or tip a single fly net that plaintiff felt he could place upon the market for sale. The attempted rescission was made on March 25th.

In behalf of the appellant, it is urged that the plaintiff was attempting, in good faith, to try out the machine and get it to work properly; that it was somewhat complicated; and that it was for the jury to say whether he retained it an unreasonable length of time for the purpose of testing.

On the other hand, the plaintiff had used the machine during the month of December, and failed to get it to work. After it was overhauled and put in what the manufacturer claimed was perfect running condition, he continued to experiment for about six weeks without results. The trial judge, in deciding the case, said that it was obvious. that a week's trial after the machine was returned would have been ample; and that an offer to return after six weeks of alleged trial came too late.

The case is a reasonably close one. Had the trial judge submitted the case to the jury, we might not be disposed to hold that it was error to do so; but we are far from being convinced that the circuit judge was clearly wrong in arriving at the conclusion which he did. A period of 212 months experimentation would seem to be an unreasonable length of time, considering the character of the machine and the further fact that at no time did the quality of the work turned out show any material improvement. Judgment affirmed.

(c) BUYER MAY ACCEPT AND SET UP BREACH OF WARRANTY BY WAY OF RECOUPMENT.

The two preceding remedies of the buyer were alike in that, in the end, the buyer did not keep the goods. In the first of these, where he had not accepted, he was entitled to damages; in the second, he was not entitled to damages. We pass, now, to the two cases where the buyer elects to keep the goods in spite of the breach of warranty, and seeks to obtain a deduction from the purchase price. The first of these rights is known as recoupment. This merely means that, when the seller sues the buyer, the buyer can recover an amount equal to the reasonable value of the goods

as they were when delivered to the buyer. The right is not identical with that of set-off, where the buyer prosecutes a cross-action; but the buyer's right of recoupment is a right to discharge his debt to the seller by the payment of the reasonable value of the goods. If it be viewed as the prosecution by the buyer of a cross-action for breach of warranty, there would be little difference in the amount of money which the buyer would be required to pay, in most cases; but in some cases, doubtless, there would be a difference

(d) BUYER MAY ACCEPT AND MAINTAIN AN ACTION FOR BREACH OF WARRANTY

If the buyer has already paid the price, his only method of obtaining reimbursement for breach of warranty will be by an inde.pendent action against the seller. If he has not paid, then he may wait until sued-that is, if he cannot compromise with the seller, a procedure which from a financial standpoint is a great deal better-and in this suit by the seller against him he may put in his claim for damages arising from the breach. Subsection (b) gives the buyer this right. In this connection we should again refer to section 49 of the Sales Act, which asserts in greater detail the same right as that provided for in subsection (b) of section 69. Section 49 provided that:

In the absence of express or implied agreement of the parties, acceptance of the goods by the buyer shall not discharge the seller from liability in damages or other legal remedy for breach of any promise or warranty in the contract to sell or the sale. But, if, after acceptance of the goods, the buyer fail to give notice to the seller of the breach of any promise or warranty within a reasonable time after the buyer knows, or ought to know of such breach, the seller shall not be liable therefor.

Looking at these sections from the business point of view, the things that stand out distinctly are: (1) The right of the buyer to keep the goods and still reserve his right to recover damages from the seller; but (2) in order to preserve this right to recover damages the buyer must give notice to the seller of the breach of warranty. The buyer must do this just as soon as he learns of the breach. Not only that, but the buyer must take some care to find out whether there is a breach of warranty, for the section states the buyer will lose his right to sue for damages if he waits to notify the buyer beyond a reasonable time.

Before the Sales Act, just as in the case of rescission, where it was found that some courts held that the buyer had no right of rescission, others that there was such a right, so here some courts held that, if a buyer accepted the goods, he must be deemed to have accepted them in full satisfaction of the obligation of the seller. The states which adopted this rule commonly expressed it by saying that an action for breach of warranty did not survive acceptance, but these courts worked out several exceptions to this general rule. Other states held that the mere fact that the buyer

accepted the goods was not in itself to be deemed a waiver of his right to sue the seller for damages. This rule was adopted by the Sales Act.

One further point should be here adverted to with respect to the measure of damages to be applied when the buyer sues the seller for breach of warranty:

Sales Act, Section 69. (6) The measure of damages for breach of warranty is the loss directly and naturally resulting, in the ordinary course of events, from the breach of warranty.

Section 69. (7) In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing proximate damage of greater amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty. The next case illustrates how the right of the buyer may easily be lost by the failure to give notice. The case following it, that of Paul Gerli & Co. v. Mistletoe Silk Mills, contains a discussion of the various remedies of the buyer for breach of warranty.

REGINA CO. v. GATELY FURNITURE CO.

(Supreme Court of New York, Appellate Division, 1916. 171 App. Div. 817, 157 N. Y. Supp. 746.)

Action by the Regina Company against the Gately Furniture Company. From a judgment sustaining plaintiff's demurrer to the alleged defense and counterclaim, defendant appeals.

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WOODWARD, J. The complaint alleges the incorporation of the plaintiff and defendant, and then sets forth that the defendant ordered from the plaintiff, on several dates, vacuum cleaners of different types, and that the said cleaners were shipped to the defendant, and were of certain agreed values; that these cleaners were received by the defendant, and that the latter agreed to pay for the same, but that no such payments had been made; and that the defendant was indebted for the aggregate of these shipments, amounting to $162.75. The answer admits the formal averments. * * * The defendant then attempts to set up a counterclaim for breach of warranty. To this alleged counterclaim the plaintiff demurred, the learned court * * sustained the demurrer. There is no allegation of any express warranty; but, as the plaintiff was a dealer in the kind of goods being sold, there was, of course, an implied warranty that the goods should be free from any defect, rendering them unmerchantable, which would not be apparent on reasonable examination of the sample. * * * At common law an express warranty survives acceptance, but an implied warranty does not. Ferguson v. Netter, 204 N. Y. 505, 510, 98 N. E. 16. Section 130 of the Personal Property Law has, however, extended the rights of purchasers, and it is there provided that: In "the absence of express or implied agreement of the parties, acceptance of the goods by the buyer shall not discharge the seller from liability in damages or other legal remedy for breach of any promise or warranty in the contract to sell or the sale." This places the warranty, whether expressed or implied, upon the

same foundation, but as a condition of this change it is provided, in the same section, that: "If, after acceptance of the goods, the buyer fails to give notice to the seller of the breach of any promise or warranty within a reasonable time after the buyer knows, or ought to know, of such breach, the seller shall not be liable therefor."

Obviously the buyer takes this additional right to the survival of a warranty, expressed or implied, upon the condition that he shall give notice of a breach of the warranty within a reasonable time. Such notice is therefore a condition precedent, and this he is obliged to plead. There is nothing said in the alleged counterclaim of any notice having been given to the seller of any alleged breach of warranty, and in the absence of such an allegation there is a failure to state the facts necessary to constitute a counterclaim.

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The interlocutory judgment appealed from should be affirmed.

PAUL GERLI & CO. v. MISTLETOE SILK MILLS.

(Supreme Court of New Jersey, 1910. 80 N. J. Law, 128, 76 Atl. 335.) Action by Paul Gerli & Co. against the Mistletoe Silk Mills. Verdict for defendant.

TRENCHARD, J. This is an action for the purchase price of a bale of raw silk delivered by the plaintiff to the defendant. The defense is that it was sold as "best classical Italian silk for single weaving," and did not answer that description. The defendant counterclaimed for profits lost and for expenses incurred in the attempt to weave the silk and recovered a verdict. Thereupon the plaintiff was allowed this rule to show cause why the verdict should not be set aside. At the trial at the Hudson circuit no loss of profits was proved, but there was evidence that the defendant had incurred expenses to the amount of $224.81. The purchase price of the silk was $872.22 and it was undisputed that it was worth $721.30 as waste. The defendant claimed that it had rescinded the contract and offered to return the goods and held them subject to the plaintiff's order. The verdict was for $224.81, the exact amount of the expenses incurred by the defendant in attempting to weave the silk. It is clear, therefore, that the jury took the view that the contract had been rescinded.

The charge of the learned trial judge did not permit the jury to allow for damages for breach of the contract in case they found it had been rescinded. Such a charge would have been erroneous in law. Under the sales act (§ 69[1]d), in case of a rescission of a contract to sell or a sale, the buyer is entitled to recover the price or any part thereof which has been paid; and this remedy is made exclusive by paragraph (2) of the same section. It is a logical consequence that, where the purchase price has not been paid, the buyer's only remedy in case of rescission is to withhold the price. Such is the view of the learned author of our sales act (Williston on Sales, § 612), and the rule recently expressed in one of our sister states. Houser & Haines Mfg. Co. v. McKay, 53 Wash. 337, 101 Pac. 894, 27 L. R. A. (N. S.) 925. * *The verdict, therefore, cannot be sustained and the rule must be made absolute. Since the case must be tried again, it may serve a useful purpose to call attention to the questions which seem likely to arise.

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The first question for the jury will of course be whether the con