19. Upon the buyer's timely receipt of both the shipment and the supplier's fax, which of the following best describes the rights and duties of the buyer and the supplier?

The mutual assent necessary for the formation of a valid contract generally takes place through an offer and an acceptance. An offer is a statement or act that creates a power of acceptance. When a person makes an offer, he is indicating that he is willing to be immediately bound by the other person's acceptance without further negotiation. An acceptance is a statement or act that indicates the offeree's immediate intent to enter into the deal proposed by the offer.

Some offers are ambiguous about whether they invite acceptance through a return promise or through performance (thus forming a unilateral contract). This commonly occurs when the offer is a request that the goods be shipped. In this situation, the Uniform Commercial Code (UCC) states that an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt shipment of conforming OR non-conforming goods, OR a prompt promise to ship. See UCC § 2-206(1)(b).

By sending a prompt shipment of non-conforming goods, a seller is accepting the offer and breaching the contract at the same time. The buyer will then be able to accept the non-conforming goods or reject them. If the buyer rejects the non-conforming goods, the buyer can then sue for breach. One important exception to this procedure is outlined in UCC § 2-206(1)(b), which provides that if the seller seasonably notifies the buyer that the shipment of non-conforming goods is being offered only as an accommodation to the buyer, the shipment of those non-conforming goods will not result in a breach. The buyer has a choice of whether to accept the accommodation shipment, which will not be treated as an acceptance from the seller, but rather as a counter-offer to sell the goods shipped as they are. If the buyer accepts the accommodation shipment, a contract for the goods as they are will be formed. If the buyer rejects the accommodation shipment, the contract is prevented from coming into existence at all, and the buyer may not sue the seller for breach.

B is correct. The supplier's note communicated to the buyer that the shipment of red widgets was to accommodate the buyer, which means it will not constitute an acceptance of the original offer, but rather, a counteroffer to form a contract around the goods shipped as they are. Because the non-conforming goods was an accommodation shipment, the supplier is not in breach of the original contract.

A is incorrect. The supplier did seasonably notify the buyer of the accommodation shipment. It is true that the buyer may accept this shipment, but acceptance would form a new contract around those goods as they are, and the supplier would not be in breach. If the buyer rejects the shipment, there is no contract formed at all and the buyer still has no action for damages because there is no breach.

C is incorrect. As explained above, the buyer has the choice of whether to accept the accommodation shipment, which was not an acceptance, but rather, a counter-offer from the supplier to sell the goods shipped as they are. If the buyer accepts the accommodation shipment, a contract for the goods as they are will be formed. If the buyer rejects the accommodation shipment, the contract is prevented from coming into existence at all, and the buyer may not sue the supplier for breach. This answer would be correct if the supplier had not properly notified the buyer that the shipment was an accommodation. However, because the shipment was an accommodation, the buyer cannot accept and then sue for breach. Acceptance of an accommodation shipment creates a new contract.

D is incorrect. «Cover» is a term used in the law of contracts to describe a remedy available to a buyer who has received an anticipatory repudiation of a contract for the receipt of goods. Under the UCC, the buyer is permitted (but not required) to find another source of the same type of goods. The buyer may then file a lawsuit against the breaching seller to recover the difference, if any, between the cost of the goods offered and the cost of the goods actually purchased. A buyer can only «cover» when the seller has breached. In this question, the supplier was making a counteroffer by sending an accommodating shipment, so there is no breach.