Article 2: Revocation of Acceptance--Should a Seller Be Granted a Setoff for the Buyer's Use of the Goods?

  Introduction

Monument Valley Auto World is an automobile dealership located in a small town.⁽¹⁾ Clint Smith has owned the dealership for a number of years, and is proud of the quality of his cars and his service department.⁽²⁾ Several months ago, he sold a new car for $20,000 and a trade- in vehicle to Jess Parker.⁽³⁾ That began what Clint can only view now as the beginning of a nightmare. The day of delivery, Jess called and said that she had had trouble with the car on her way home.⁽⁴⁾ Clint asked her to bring it in and some adjustments were made.⁽⁵⁾ Since then, however, the car has been in Clint's repair shop numerous times: the air-conditioning leaked and rattled;⁽⁶⁾ the front end vibrated;⁽⁷⁾ and the steering column required adjustment.⁽⁸⁾ Clint believes that his service department made the repairs competently, and that the car, if more problems occur, can be fixed so that it runs properly.⁽⁹⁾ Two months ago, however, he received a letter from Jess indicating that she wanted to either return the car and have her purchase price refunded, or receive a new car.⁽¹⁰⁾ She also asked Clint to tell her how to return the car.⁽¹¹⁾

Clint knew that the car had at least 12,000 miles on it.⁽¹²⁾ Because he would lose money if he did what Jess wanted, Clint decided to wait.⁽¹³⁾ Today, he received a notice that Jess is taking him to court. The notice indicated that under Article 2 of the Uniform Commercial Code (Code), she is revoking her acceptance of the car and is seeking her purchase price along with other damages.⁽¹⁴⁾ Frances, Clint's lawyer, has explained that under the Code, a buyer who has accepted a good, such as a car, can revoke acceptance if the buyer can show that the good's defects substantially impair the value of the good to the buyer.⁽¹⁵⁾ Such revocation of acceptance must be made in a timely manner, with notice to the seller.⁽¹⁶⁾

Assuming that Jess can meet these conditions, she will be able to revoke her acceptance of the car, and will be entitled to a refund of the purchase price.⁽¹⁷⁾ Clint believes that if he is forced to refund the purchase price, Jess should be required to pay him for her use of the car.⁽¹⁸⁾

This Note examines how courts have addressed the issue of whether a seller who provides non-conforming goods to a buyer should be allowed some setoff⁽¹⁹⁾ to the buyer's damages for the value of the buyer's use. Part II discusses general principles underlying the Code's remedies and the specific remedies of rejection and revocation.⁽²⁰⁾ Setoff arises in revocation cases as well as in rejection cases, because in both actions, the seller is forced to take back the goods and, in addition to other remedies, may be required to refund the purchase price to the buyer.⁽²¹⁾ Part III discusses cases in which courts have addressed the issue of whether to allow a setoff.⁽²²⁾ Part IV discusses how courts allowing a setoff have attempted to measure the value of a buyer's use of goods.⁽²³⁾ Part V discusses a buyer's ability to claim interest if the seller is allowed a setoff.⁽²⁴⁾ Part VI applies⁽²⁵⁾ the cases and law discussed throughout this Note to the hypothetical described in Part I. Further, Part VI contains recommendations for revisions to Article 2 that would provide clearer guidance for buyers, sellers, attorneys, and the courts.

  Remedies Available to Buyers Under the Code

A.  General Remedial Objectives of the Code

The primary purpose of the Code is to facilitate "the expansion of commercial practices."⁽²⁶⁾ This is achieved through specific provisions of the Code,⁽²⁷⁾ as well as section 1-103, which provides that the Code is to be supplemented by principles of law and equity.⁽²⁸⁾

The underlying doctrine for Code remedies is contained in section 1-106,⁽²⁹⁾ which restates "the common-law theory of contract damages."⁽³⁰⁾ Remedies under the Code are designed to protect the expectation interest of the party not in breach,⁽³¹⁾ and to provide "just compensation for the loss."⁽³²⁾ The focus of the Code's remedial structure is on the anticipated future result if a party in breach has fully performed.⁽³³⁾ Remedies under the Code are found in several sections, depending on who the breaching party is and at what point in the transaction breach occurs.⁽³⁴⁾

When a seller tenders goods identified in a contract, and these goods are non-conforming, several options are available to the buyer.⁽³⁵⁾ All of the goods may be accepted,⁽³⁶⁾ all of the goods may be rejected,⁽³⁷⁾ or any identifiable commercial unit or units may be accepted and the remainder may be rejected.⁽³⁸⁾ Rejection is possible if the goods fail to conform in any respect to the relevant contract.⁽³⁹⁾ Goods that have been accepted may not be subsequently rejected by the buyer.⁽⁴⁰⁾ Under certain conditions, a buyer who has accepted non-conforming goods may still retract or revoke acceptance and recover damages as if the goods had been rejected.⁽⁴¹⁾ If the conditions for revocation of acceptance cannot be met and the goods are defective, the buyer may have an action for breach of warranty.⁽⁴²⁾ In such an instance, however, the buyer is still obligated to pay the contract price.⁽⁴³⁾ Damages for breach of warranty are limited to the difference between the value of the goods as accepted, and the value they would have had "if they had been as warranted," unless circumstances otherwise dictate.⁽⁴⁴⁾ Rejection and revocation of acceptance are significant remedies for a buyer because either action allows a buyer to foist defective goods back upon the seller, freeing a buyer from his or her obligation to pay the price, and allowing the buyer to recover any paid portion of the sale price.⁽⁴⁵⁾

B.  Rejection As a Remedy for the Buyer

Acceptance is the critical time in deciding whether a buyer's action with respect to the non-conforming goods constitutes rejection or revocation of acceptance.⁽⁴⁶⁾ Rejection is available only to a buyer who has not accepted goods.⁽⁴⁷⁾ Goods may be rejected upon delivery if they fail in any manner to conform to the relevant contract.⁽⁴⁸⁾ Although section 2-601 of the Code purports to reflect the perfect tender rule,⁽⁴⁹⁾ in reality, other provisions of the Code place restrictions on a buyer's ability to reject.⁽⁵⁰⁾ To be effective, rejection must occur within a reasonable time after delivery, and the seller must be notified of the rejection.⁽⁵¹⁾

Following rejection, a buyer is responsible for exercising reasonable care with respect to rejected goods, and may resell, reship, or store the goods.⁽⁵²⁾ An act that is inconsistent with a seller's ownership, such as continued use, will negate rejection, and a buyer will be considered to have accepted the goods.⁽⁵³⁾ If a buyer is consequently considered to have accepted the goods, he or she is limited to revocation of acceptance or a suit for damages for breach of warranty as possible remedies.⁽⁵⁴⁾

C.  Revocation of Acceptance As a Remedy for the Buyer

Revocation, by definition, occurs after acceptance.⁽⁵⁵⁾ Once a buyer has had a reasonable opportunity to inspect the goods and indicates to the seller that they are either conforming or non-conforming, but that he or she will retain them, the buyer is considered to have accepted the goods.⁽⁵⁶⁾ Acceptance may also be demonstrated by a buyer's failure to notify the seller of rejection or by acts that are inconsistent with the seller's ownership.⁽⁵⁷⁾

Revocation of acceptance provides an opportunity, after the time for rejection has passed, for a buyer to return non-conforming goods to the seller and to recover damages as if the goods had been rejected.⁽⁵⁸⁾ The elements of an effective revocation of acceptance are: a buyer's ability to show that the value of the goods was substantially impaired by defects;⁽⁵⁹⁾ the defects were hidden or acceptance was based on the seller's assurance that the non-conformity would be cured; and notice to the seller was provided within a reasonable time after the defects were discovered.⁽⁶⁰⁾ Revocation of acceptance must occur before there is a substantial change to the condition of the goods not caused by the defects in the goods.⁽⁶¹⁾

Examination of a number of cases in which a buyer has revoked acceptance reveals that in many instances, buyers were in possession and often had made use of the goods for a substantial period of time.⁽⁶²⁾ Notwithstanding the Code's provision that revocation of acceptance should not be allowed if the condition of the goods has changed,⁽⁶³⁾ courts have allowed revocation of acceptance after a substantial lapse of time,⁽⁶⁴⁾ and have not considered use following notice to bar an effective revocation of acceptance.⁽⁶⁵⁾

Several courts have justified continued use of goods by a buyer as necessary in order to protect a buyer's security interest.⁽⁶⁶⁾ Because of this interest, a buyer is not obligated to return the goods to the seller, absent the seller's request to do so.⁽⁶⁷⁾ If the seller does not provide instructions that allow the buyer to return the goods, the buyer is obligated to take reasonable care of the goods, but the buyer may resell the goods in order to recover any monies paid or expenses incurred.⁽⁶⁸⁾

Many of the cases raising the issue of revocation do so in the context of purchases by consumers,⁽⁶⁹⁾ often involving an item such as a mobile home or a car.⁽⁷⁰⁾ A buyer's need for a place to live or for transportation, coupled with a substantial period of possession, can create difficulties for courts determining the effectiveness of a revocation of acceptance or fashioning an appropriate remedy.⁽⁷¹⁾ A court may be presented with a situation in which a buyer has accepted delivery of goods and has then sought to return those goods to the seller following discovery of a substantial defect.⁽⁷²⁾ If a seller has refused to accept a return of the goods and has made repeated attempts to cure the defect,⁽⁷³⁾ the seller's unwillingness to take possession and refund the purchase price would leave the buyer no reasonable alternative but to continue to use the item.⁽⁷⁴⁾ Particularly with regard to necessaries,⁽⁷⁵⁾ courts often have not been willing to allow a seller to avoid an effective revocation of acceptance because of a continued use which was the result of the seller's refusal to accept a re-tender of the goods.⁽⁷⁶⁾ In determining whether a buyer's continued use would negate a revocation of acceptance, many courts have considered whether the use was reasonable.⁽⁷⁷⁾ Consequently, standards for assessing reasonableness are developing.⁽⁷⁸⁾

In McCullough v. Bill Swad Chrysler-Plymouth,⁽⁷⁹⁾ the buyer, a young secretary, purchased a car from the seller in May 1978.⁽⁸⁰⁾ She began having problems almost immediately.⁽⁸¹⁾ The brakes failed shortly after delivery and again within two months of being repaired.⁽⁸²⁾ On one occasion, the engine stopped, which required the car to be towed.⁽⁸³⁾ There were also problems with both the steering mechanism and the paint job.⁽⁸⁴⁾ The seller attempted repairs,⁽⁸⁵⁾ but new defects appeared after the car was serviced by the dealer.⁽⁸⁶⁾ Approximately three months after purchase, the buyer submitted a list of thirty-two defects to the seller, but few of the problems were successfully repaired.⁽⁸⁷⁾ Nineteen months after delivery, the buyer notified the seller that she wished to rescind the contract,⁽⁸⁸⁾ and sought a refund of the purchase price as well as other expenses.⁽⁸⁹⁾ The buyer continued to use the car, and at the time of trial, there were 35,000 miles on it--approximately 23,000 of which were driven after the notice of revocation was mailed to the seller.⁽⁹⁰⁾

The seller contended that the buyer's continued use of the car was inconsistent with revocation and, therefore, she had waived her right to revoke.⁽⁹¹⁾ The appellate court affirmed the decision of the trial court in favor of the buyer, and awarded the purchase price, finding that the buyer's continued use was reasonable and that her revocation of acceptance was effective and justified.⁽⁹²⁾

McCullough, a case of first impression in Ohio, presented the issue of whether a buyer's continued use after revocation constituted a waiver of the buyer's right to revoke acceptance.⁽⁹³⁾ The court agreed with other jurisdictions in finding that "reasonable use" would not vitiate an effective revocation.⁽⁹⁴⁾ In defining "reasonable use" the court posed the following questions to be answered by a trier of fact: (1) after receiving notice, did the seller provide instructions to the buyer regarding the return of the goods?; (2) were there circumstances related to the buyer's personal or business needs which necessitated continued use?; (3) did the seller continue to offer to repair or provide compensation for inconveniences during the period?; (4) was there good faith on the part of the seller?; and (5) did the continued use unduly prejudice the seller?⁽⁹⁵⁾

In affirming the lower court's decision, the Ohio Supreme Court noted that the buyer was a young secretary of limited financial means who could not afford to cease using the car, purchase a second car, and be responsible for two car loans.⁽⁹⁶⁾ Further, the court found that the seller had not been unduly prejudiced by the buyer's continued use.⁽⁹⁷⁾ This finding was based on the fact that the seller could have avoided a significant portion of the decrease in the value of the car if the seller had accepted return of the car at the time of the buyer's revocation.⁽⁹⁸⁾

Finding the seller's promises to repair as a basis for determining that post-revocation use was reasonable, the court in North River Homes, Inc. v. Bosarge⁽⁹⁹⁾ allowed revocation despite nineteen months of occupancy of the mobile home following the buyers' notice of revocation of acceptance.⁽¹⁰⁰⁾ The Bosarges (the buyers) purchased a mobile home in August 1983, and defects in this "`Cadillac of mobile homes'" appeared immediately.⁽¹⁰¹⁾ Within three months of moving in, the Bosarges notified North River Homes, the manufacturer, that they wished to revoke acceptance of the mobile home.⁽¹⁰²⁾ Based on promises from North River Homes that the defects would be repaired, the Bosarges continued to occupy the home.⁽¹⁰³⁾ Over the next several months, repairmen visited the Bosarges' home on several occasions but with little success in repairing the defects.⁽¹⁰⁴⁾ In June, ten months after their purchase, the Bosarges provided North River Homes with an "exhaustive" list of the defects.⁽¹⁰⁵⁾ Despite repeated assurances and attempts at repair, the defects were never satisfactorily corrected.⁽¹⁰⁶⁾ In October 1984, fourteen months after the purchase of the mobile home, the Bosarges notified North River Homes that they would make no further payments until their "home [was] replaced or repaired to [their] satisfaction."⁽¹⁰⁷⁾ The court considered this to be the Bosarges' notice of revocation.⁽¹⁰⁸⁾ The Bosarges continued to occupy the home until it was repossessed nineteen months later.⁽¹⁰⁹⁾

North River Homes argued that the Bosarges' continued occupation of the mobile home should be viewed as a waiver of their revocation of acceptance.⁽¹¹⁰⁾ In finding North River Homes's argument unpersuasive, the court relied on two factors.⁽¹¹¹⁾ The first factor was that the seller had continued to make assurances that the defects would be cured.⁽¹¹²⁾ The second factor, in the words of the court, was the "simple and understandable" reason found in the Bosarges' testimony: "`[w]hen you tie up all your savings into purchasing a home, you cannot take it and park it somewhere[. Y]ou have got to live in it until you can get the people to clear your lot so you can put another one on it.'"⁽¹¹³⁾ The only consequences of the continued use by the buyer would be that the amount of damages might be subject to a setoff⁽¹¹⁴⁾ for the reasonable value of the Borsarges' use of the mobile home.⁽¹¹⁵⁾

In McCullough and North River Homes, the courts found the buyers' revocations of acceptance justified, despite continued use.⁽¹¹⁶⁾ The courts were willing to consider extending the time for an effective revocation because of the sellers' attempts to cure.⁽¹¹⁷⁾

Applicable remedies following effective revocation are contained in section 2-711.⁽¹¹⁸⁾ A buyer has the option of cancelling.⁽¹¹⁹⁾ Regardless of whether a buyer does or does not cancel, however, the buyer is entitled to recover as much of the purchase price as has been paid.⁽¹²⁰⁾ In addition, section 2-711 provides that a buyer may "cover" under section 2-712, and be entitled to the difference between the cost of the substituted goods and the contract price.⁽¹²¹⁾ If, however, a buyer chooses not to cover, then, in addition to the purchase price paid, the buyer may recover the difference between the market price and the contract price.⁽¹²²⁾ A buyer is also able to recover any incidental and consequential damages that he or she can prove.⁽¹²³⁾ The broad goal of section 2-608, therefore, in combination with other Code remedial provisions, is to meet an aggrieved party's expectation interest.⁽¹²⁴⁾

The difficulty in identifying defects,⁽¹²⁵⁾ coupled with the increasing judicial tolerance of a buyer's continued use of goods following revocation,⁽¹²⁶⁾ may result in a substantial period of use both prior and subsequent to a revocation of acceptance.⁽¹²⁷⁾ The buyer, therefore, receives some benefit from the goods.⁽¹²⁸⁾ The value of the goods ultimately returned to a seller is reduced, not simply because of their defective condition or changed market conditions, but because the goods have been used.⁽¹²⁹⁾ Refunding the purchase price paid for new goods, and allowing the remedies provided for in section 2-711,⁽¹³⁰⁾ not only meets a buyer's expectation interest, but also may result in an unjust enrichment to the buyer.⁽¹³¹⁾ The Code, however, contains no provision that would require an adjustment in the damages awarded to a buyer to account for the buyer's use.⁽¹³²⁾ Many courts⁽¹³³⁾ and commentators,⁽¹³⁴⁾ however, have found that allowing a setoff to a buyer's damages is consistent with the general goals of the Code.⁽¹³⁵⁾ Utilizing equitable principles found in section 1-103 of the Code,⁽¹³⁶⁾ courts have allowed a setoff to a seller when the buyer has either used the goods for a significant period before revocation, or has continued to use them following revocation.⁽¹³⁷⁾ The use of a setoff has enabled courts to allow continued use following notice of revocation of items such as mobile homes and cars without considering it a reacceptance.⁽¹³⁸⁾ Perhaps because the Code is silent on this issue,⁽¹³⁹⁾ courts are split as to whether such a setoff should be allowed;⁽¹⁴⁰⁾ and if allowed, for what period⁽¹⁴¹⁾ and how the value of use should be determined.⁽¹⁴²⁾

  Setoff

A.  Setoff Not Allowed

Although in the minority, there are cases in which courts have declined to consider or have limited the circumstances in which a setoff has been allowed.⁽¹⁴³⁾

1. Sanborn v. Aranosian

In Sanborn v. Aranosian,⁽¹⁴⁴⁾ the Sanborns purchased a 1976 Fiat that had been used as a dealer demonstrator vehicle.⁽¹⁴⁵⁾ Almost immediately, they began experiencing mechanical problems, which were not adequately addressed, and upon being informed seven months after their purchase of the need for "major engine repair[s],"⁽¹⁴⁶⁾ they notified the dealer that they were revoking their acceptance.⁽¹⁴⁷⁾ The dealer refused to take back the car.⁽¹⁴⁸⁾ Three months later, the buyers used the car as a trade-in on the purchase of a new car.⁽¹⁴⁹⁾ At that time, the car had been driven 17,000 miles.⁽¹⁵⁰⁾ The Sanborns brought an action seeking damages for breach of warranty, strict liability, and negligence.⁽¹⁵¹⁾ The master found that the Sanborns' revocation of acceptance had been justified, and that their resale had been proper.⁽¹⁵²⁾ The master ruled that the Sanborns were, therefore, entitled to the purchase price ($4,605), less the proceeds of the resale ($2,500).⁽¹⁵³⁾ The dealer did not contest the finding of an effective revocation, but claimed that the correct measure of damages would be based upon section 382-A:2-714 of New Hampshire's version of the Uniform Commercial Code.⁽¹⁵⁴⁾ The Supreme Court of New Hampshire, in upholding the master's report, found that section 382-A:2-714 was only applicable after the time for revocation had passed and, therefore, the applicable remedies were those listed under the state's version of section 2-711.⁽¹⁵⁵⁾ The court concluded that the remedy available to a buyer who has justifiably revoked acceptance of a good, is a refund of the purchase price paid, and also that section 382-A:2-711 of the state's code⁽¹⁵⁶⁾ "does not allow setoff of any benefit which plaintiffs received by having the use of the car."⁽¹⁵⁷⁾

2. Barco Auto Leasing Corp. v. House

In Barco Auto Leasing Corp. v. House,⁽¹⁵⁸⁾ House entered into an agreement with the Barco Auto Leasing Corporation; he believed that the agreement was for the lease of a car.⁽¹⁵⁹⁾ The agreement was for a three-year period, and included a rider requiring House to purchase the car for $5,500 at the end of the three-year period.⁽¹⁶⁰⁾ When House returned the car ten months prior to the end of the lease period, Barco sued for the amount remaining on the lease.⁽¹⁶¹⁾ House counterclaimed, asserting that the lease was in fact a sale, and had violated a provision of the Retail Installment Sales Financing Act (RISFA),⁽¹⁶²⁾ a Connecticut consumer protection statute.⁽¹⁶³⁾ The trial court found that Barco had violated RISFA.⁽¹⁶⁴⁾ As rescission is an implied remedy under RISFA,⁽¹⁶⁵⁾ the contract was cancelled and payments made were refunded to House.⁽¹⁶⁶⁾ Barco appealed the computation of damages, claiming that it should have received a setoff for the fair rental value of House's use of the car for more than two years.⁽¹⁶⁷⁾ Because RISFA was silent on the measure of damages available when a consumer rescinded a contract,⁽¹⁶⁸⁾ the court assumed that consumers under RISFA would have at least the rights available under the Code, and used Connecticut's version of section 2-608⁽¹⁶⁹⁾ to determine the available remedy.⁽¹⁷⁰⁾ Noting that section 2-608 does not explicitly provide for a setoff, the court concluded that if the drafters of the Code had intended a right of setoff, they would have expressly provided for it, as was evidenced by an inclusion of this right in section 2-718(3).⁽¹⁷¹⁾ The Barco court acknowledged that some courts and commentators had liberally found the right to a setoff to coexist with a buyer's right to a refund of the purchase price.⁽¹⁷²⁾ The Barco court further acknowledged that in some circumstances, equitable principles may require such a setoff.⁽¹⁷³⁾ The Barco court nonetheless declined to allow for a setoff.⁽¹⁷⁴⁾ The court found that "[o]nly in very special circumstances, such as those contemplated by General Statutes § 42a-2-718(3), do principles of equity compel a different result."⁽¹⁷⁵⁾

3. Stridiron v. I.C., Inc.

In a third case, Stridiron v. I.C., Inc.,⁽¹⁷⁶⁾ the United States District Court for the District of the Virgin Islands reviewed the decision of a territorial court allowing the revocation of acceptance of a car.⁽¹⁷⁷⁾ Seeking transportation to work, Mr. Stridiron had purchased a new car from I.C., Inc., a car dealership.⁽¹⁷⁸⁾ Within two weeks of his purchase, the car was back at the dealer for repairs.⁽¹⁷⁹⁾ Over a seven-month period, the car was brought in many times for repairs, each time resulting in a loss of use for several days.⁽¹⁸⁰⁾

The trial court found that the buyer had justifiably revoked acceptance, and awarded him the purchase price, bank costs, and incidental damages, as well as interest on the purchase price.⁽¹⁸¹⁾ On appeal, the district court found two aspects of the lower court's decision troubling.⁽¹⁸²⁾ First, the trial court had not considered the 6933 miles that the car had been driven to represent a substantial change in condition that may have precluded an effective revocation of acceptance.⁽¹⁸³⁾

In considering this issue, the district court recognized that the purpose for the change-in-condition policy is twofold: first, it protects the seller by ensuring that goods will be returned in sufficiently good condition so that they can be resold; and second, it prevents unjust enrichment to the buyer.⁽¹⁸⁴⁾ The court, however, reasoned that since Stridiron's use of the goods had occurred during a period in which the seller had been trying to cure the defects, Stridiron's use should not be held against the buyer.⁽¹⁸⁵⁾ Recognizing that a number of authorities had found continued use inevitable during the period when a seller attempted to cure defects, the district court held that there was no substantial change that would bar revocation of acceptance.⁽¹⁸⁶⁾

The second aspect of the trial court's decision that the district court questioned, concerned the trial court's ruling regarding the dealer's request for a setoff against the damages for Stridiron's use of the car.⁽¹⁸⁷⁾ The car had 100 miles on it when purchased, and 6933 miles at the time of revocation of acceptance.⁽¹⁸⁸⁾ Notwithstanding this use, the trial court had ruled that calculation of a setoff would be impossible, as the use "was not capable of monetary quantification."⁽¹⁸⁹⁾ Although allowing a setoff appeared inconsistent with title 11A, section 2-608 of the Virgin Islands Code, the district court noted that many courts and commentators recognize granting such a setoff.⁽¹⁹⁰⁾ In a footnote, the district court noted two cases, one of which allowed a monetary recovery without proof, and in the other, the parties stipulated to a per-mile charge to be used in computing a setoff for the seller due to the buyer's use.⁽¹⁹¹⁾ Nonetheless, the district court did not find error in the trial court's refusal to grant a setoff.⁽¹⁹²⁾

B. Allowing Setoff

Although courts have employed various means to justify awarding setoffs to a variety of sellers, an underlying policy apparent in these cases is the willingness to employ the Code's equitable principles.⁽¹⁹³⁾ The following cases illustrate how courts have used the equitable principles of section 1-103 of the Code in order to grant a seller a setoff even though such an explicit provision does not exist in the Code.⁽¹⁹⁴⁾

1. Stroh v. American Recreation & Mobile Home Corp.

In Stroh v. American Recreation & Mobile Home Corp.,⁽¹⁹⁵⁾ the buyers purchased a mobile home that was plagued with defects.⁽¹⁹⁶⁾ Following twelve months of unsuccessful attempts to have repairs made, the buyers notified the seller that they were revoking their acceptance of the mobile home.⁽¹⁹⁷⁾ Three months later, the buyers filed suit seeking rescission of the contract and a refund of the purchase price.⁽¹⁹⁸⁾ After giving a notice of revocation of acceptance, the buyers had occupied the home for seventeen months ⁽¹⁹⁹⁾

Although the court found the revocation of acceptance to be effective,⁽²⁰⁰⁾ the court stated that, in determining the measure of damages, it was necessary to assess whether the buyers' continued occupancy affected their right to be awarded the full purchase price.⁽²⁰¹⁾ Noting that revocation of acceptance is a buyer's acknowledgement that the goods belong to the seller,⁽²⁰²⁾ the court found continued occupation of the home to be inconsistent with that acknowledgement.⁽²⁰³⁾ The court determined that although the Strohs had retained a security interest in the home after the revocation of acceptance,⁽²⁰⁴⁾ they also had a responsibility under section 2-604 of the Code to store, reship, or resell the goods on the seller's account.⁽²⁰⁵⁾ The court reasoned that the buyers' remedies, however, did not include the right to a beneficial use of the home and, therefore, their continued occupancy was wrongful and the seller was entitled to damages.⁽²⁰⁶⁾

The court in Stroh relied on Colorado's version of section 1-103 of the Code, which incorporated principles of equity to provide a basis for a setoff award to the seller.⁽²⁰⁷⁾ The court first recognized the general rule that following rescission of a contract, a buyer is considered to hold goods as a bailee for the seller, and is, therefore, liable for the value of any use.⁽²⁰⁸⁾ The court then found this to be consistent with general principles of the Code and principles of equity.⁽²⁰⁹⁾ Finding that the buyers' use of the mobile home after notice of revocation decreased the value of the home, the court held that the seller was entitled to a setoff, based on a fair and reasonable use value.⁽²¹⁰⁾

2. Moore v. Howard Pontiac-American, Inc.

In Moore v. Howard Pontiac-American, Inc.,⁽²¹¹⁾ Moore purchased a new car and noticed defects before he arrived home from the dealership.⁽²¹²⁾ He immediately asked the dealer to take the car back, but the dealer refused.⁽²¹³⁾ In a suit filed approximately two months after delivery, Moore sought to cancel the contract and recover damages.⁽²¹⁴⁾ Although he initially stopped using the car, the cost of alternate transportation became prohibitive, and Moore resumed using the car after two months.⁽²¹⁵⁾ Although the dealer continually attempted to repair the car, all efforts were unsuccessful.⁽²¹⁶⁾ Ten months after the purchase, Moore notified the dealer that he was revoking acceptance of the car.⁽²¹⁷⁾ At trial, the chancellor awarded Moore the full purchase price as damages.⁽²¹⁸⁾ The Tennessee Court of Appeals, however, found that "`complete justice and equity cannot be meted to the parties . . . unless the [seller] is allowed a fair and reasonable compensation for the [buyer's] use of the automobile.'"⁽²¹⁹⁾ "[T]herefore . . . the [seller] is entitled to [a setoff] of a fair and reasonable use value of the automobile for the time the [buyer] made use of the automobile based upon the condition of this particular automobile."⁽²²⁰⁾ The case was remanded for a determination of an appropriate amount for the setoff.⁽²²¹⁾

3. Johnson v. GMC, Chevrolet Motors Division

In Johnson v. GMC, Chevrolet Motors Division,⁽²²²⁾ the Johnsons purchased a new truck from a local dealership. Problems with the truck began on the way home from the dealership and persisted for several months, despite numerous attempts at repair.⁽²²³⁾ Almost two months after delivery, the Johnsons notified the dealer that they were revoking their acceptance of the truck.⁽²²⁴⁾ Their offer to return the truck was refused by General Motors Corporation (GMC).⁽²²⁵⁾ Following their notice of revocation, the Johnsons continued to use the truck, and repairs were made by the dealer under the warranty.⁽²²⁶⁾ The trial court determined that the Johnsons' revocation was valid⁽²²⁷⁾ and held a second hearing to determine what GMC's setoff should be, based on the Johnsons' continued use of the truck after revocation.⁽²²⁸⁾ The Johnsons appealed the trial court's assessment of a setoff, contending that a buyer may use goods following revocation, without penalty, when the use of the goods is necessary.⁽²²⁹⁾

The Supreme Court of Kansas disagreed with the Johnsons.⁽²³⁰⁾ In one of the more detailed decisions addressing post-revocation use and setoff, the court explained that a buyer who revokes acceptance has a greater burden than a rejecting buyer because the goods have been held for a longer period of time.⁽²³¹⁾ This arises from the fact that the longer that goods are in the possession of a buyer, the greater the depreciation and the more likely that the buyer has received some benefit from his or her use following revocation.⁽²³²⁾ As in Stroh v. American Recreation & Mobile Home Corp.,⁽²³³⁾ the court found that the buyers had failed to exercise their options under section 2-604 of the Code to return, store, or resell the goods.⁽²³⁴⁾ The court acknowledged that continued use of goods after revocation may constitute reacceptance and invalidate a cancellation of the sale.⁽²³⁵⁾ In Johnson, however, the court found that use following notice of revocation did not reflect continued ownership on the part of the Johnsons, particularly in light of a general unavailability of public transportation.⁽²³⁶⁾ The court then cited the reasoning employed in Stroh,⁽²³⁷⁾ holding that a buyer's continued use, while wrongful as against the seller, did not vitiate the revocation of acceptance, but only entitled the seller to a setoff of the fair and reasonable value of use following revocation.⁽²³⁸⁾ The court distinguished Sanborn v. Aranosian,⁽²³⁹⁾--a case raised by the Johnsons for the proposition that a setoff should be denied--as a case in which the seller sought a setoff for use that came prior to a revocation of acceptance.⁽²⁴⁰⁾ The premise for allowing the seller a setoff, in the Johnson court's opinion, was that the buyer's continued use, after revocation of acceptance, resulted in a decrease in value, for which the seller was entitled to receive restitution.⁽²⁴¹⁾

C. Restitution As a Supplement to Code Remedies

The Code gives little guidance about the protection of a party's restitutionary interest.⁽²⁴²⁾ The allowance of a setoff to the seller in Stroh, Moore, and Johnson, however, demonstrates how courts have used equitable principles to supplement Code remedies in order to achieve results that address a party's restitutionary interest, as well as the expectation interest normally protected by Code remedies.⁽²⁴³⁾ The protection of a party's restitutionary interest is accomplished through a return in value for any benefit conferred upon another party in order to prevent unjust enrichment.⁽²⁴⁴⁾ The fault of the parties is not an issue in determining restitution.⁽²⁴⁵⁾ Protection of the restitutionary interest has been one of the basic goals supporting legal intervention in contract cases.⁽²⁴⁶⁾ The Code's incorporation of principles of law and equity under the law of contracts allows for the protection of a party's restitutionary interest through Code remedies.⁽²⁴⁷⁾

Initially, courts in contract cases were averse to recognizing a restitutionary interest for a breaching party.⁽²⁴⁸⁾ However, beginning as early as 1834 in Britton v. Turner,⁽²⁴⁹⁾ courts recognized that awarding restitution to a party in breach may be necessary in order to prevent unjust enrichment.⁽²⁵⁰⁾

In reaching its decision in Lancellotti v. Thomas,⁽²⁵¹⁾ the Pennsylvania Superior Court recognized with approval a line of cases that began with Britton and reflected the modern trend of permitting recovery by the breaching party.⁽²⁵²⁾ The Lancellotti court noted Professor Perillo's perspective that change was appropriate, because as times change, justice may be seen differently and adjustments may need to be made.⁽²⁵³⁾ Both the Lancellotti court and Professor Perillo acknowledged the Code's influence in advancing this position, particularly in section 2-718, which allows a breaching buyer restitution for payments made.⁽²⁵⁴⁾ In cases in which the buyer revokes acceptance of a good under the Code, protection of the breaching seller's restitutionary interest through a setoff is, therefore, consistent with general contract law and equitable principles.⁽²⁵⁵⁾

  Measuring the Value of the Setoff

Acknowledgement by various courts that equitable principles of the Code allow for a setoff for the seller is only the first step.⁽²⁵⁶⁾

A.  For What Period of Use Should the Setoff Be Allowed?

The cases involving a revocation of acceptance often involve long periods of use both before and after the seller is notified of revocation.⁽²⁵⁷⁾ Courts, therefore, have had to address whether principles allowing setoffs apply 1) only to use prior to revocation of acceptance, 2) only to use following revocation of acceptance, or 3) for the entire period from the time of purchase to the date the goods are returned to the seller.⁽²⁵⁸⁾ The following cases discuss how some courts have addressed this problem.

In Triad Systems Corp. v. Alsip,⁽²⁵⁹⁾ the jury allowed a setoff for the buyer's use of computer equipment prior to notice of revocation of acceptance.⁽²⁶⁰⁾ The buyer had used the equipment for more than two years prior to revocation of acceptance and for some unspecified period after notice was given.⁽²⁶¹⁾ Although the seller appealed the judgment, the buyer did not appeal the allowance of the setoff.⁽²⁶²⁾ While it is explicit in the appellate court's opinion that the setoff was awarded only for use prior to revocation, the decision is silent as to why no setoff was granted for post-revocation use.⁽²⁶³⁾ It is also unclear whether a setoff was even considered for that period.⁽²⁶⁴⁾

In Ford Motor Credit Co. v. Harper,⁽²⁶⁵⁾ the buyer was a farmer who purchased a tractor so plagued with problems, that it was unsuitable for plowing his fields.⁽²⁶⁶⁾ The seller made a number of unsuccessful repair attempts, and Harper revoked his acceptance of the tractor while the tractor was in the possession of the dealer for repairs.⁽²⁶⁷⁾ Harper never returned for the tractor and, therefore, never used the tractor following notice of his revocation of acceptance.⁽²⁶⁸⁾ The court, however, found that the seller would be entitled to a setoff based on the value of Harper's use of the tractor.⁽²⁶⁹⁾ Because Harper never used the tractor after the revocation of acceptance, the court never explicitly addressed the period for which a setoff would be allowed.⁽²⁷⁰⁾ Nothing in the court's language, however, indicated that a distinction should be made depending upon whether use was prior or subsequent to revocation of acceptance.⁽²⁷¹⁾

In Johnson v. GMC, Chevrolet Motors Division,⁽²⁷²⁾ the seller's setoff was limited to the value of the buyers' use of the truck following the notice of revocation of acceptance.⁽²⁷³⁾ The court awarded the setoff after finding that the buyers' continued use after the revocation of acceptance was wrongful as against the seller.⁽²⁷⁴⁾ The court reasoned that the buyers' continued use decreased the value of the truck, making the buyers liable to the seller for the value of this use.⁽²⁷⁵⁾ The computation of the seller's setoff, therefore, was based on mileage, as a measure of the Johnsons' use, following notice of revocation of acceptance.⁽²⁷⁶⁾

In Ex parte Stem,⁽²⁷⁷⁾ Stem purchased a used car, only to learn one week later that "the front end [was that] of a 1979 BMW and the rear end [was that] of a 1975 BMW."⁽²⁷⁸⁾ He also discovered that there were 170,000 miles on the front end--100,000 more that he had believed when he purchased the car.⁽²⁷⁹⁾ Approximately two weeks after the purchase, he notified the seller that he wanted to rescind the sale.⁽²⁸⁰⁾ The seller refused to take the car back, and Stem drove it for seven months before initiating a court action.⁽²⁸¹⁾

The trial court awarded Stem his purchase price plus interest.⁽²⁸²⁾ The Alabama Court of Civil Appeals reversed the award, finding that Stem's continued use constituted an act that was inconsistent with the seller's ownership of the car.⁽²⁸³⁾ This finding prevented Stem from rescinding the sale.⁽²⁸⁴⁾ As noted by the Supreme Court of Alabama, the appeals court also addressed whether Stem had revoked his acceptance of the car.⁽²⁸⁵⁾ In the view of the Supreme Court of Alabama, however, the proper place to begin the analysis of this case was with a determination of the effectiveness of Stem's revocation of acceptance.⁽²⁸⁶⁾

The Alabama Supreme Court found that Stem's revocation of acceptance was effective, and reversed the lower appellate court.⁽²⁸⁷⁾ The court concluded that Stem's continued use, while wrongful, did not constitute reacceptance.⁽²⁸⁸⁾ Quoting extensively from the reasoning of the Stroh opinion, the court found that the seller was entitled to a setoff for the value of the buyer's use for the period after revocation of acceptance.⁽²⁸⁹⁾ The case was remanded to the trial court for a determination of the appropriate setoff.⁽²⁹⁰⁾ Given the court's clear adoption of Stroh, the setoff is likely to have been based on the value of the use following notice of revocation of acceptance.⁽²⁹¹⁾ Because Stem had revoked acceptance shortly after delivery, the assessment of the value he received would have been based on virtually his entire usage.⁽²⁹²⁾

Some courts, however, have not divided the period into pre- and post-revocation use and, in fact, have considered the entire period of time--from the date of purchase, to the return of the goods to the seller--in determining the appropriate setoff. For example, in Erling v. Homera, Inc.,⁽²⁹³⁾ the buyers of a mobile home were found to have made an effective revocation of acceptance approximately nineteen months after purchase.⁽²⁹⁴⁾ The buyers were still living in the mobile home at the time of the appeal--more than four years later.⁽²⁹⁵⁾ The trial court awarded the buyers their purchase price, without interest.⁽²⁹⁶⁾ The Supreme Court of North Dakota affirmed the trial court's ruling regarding the effectiveness of revocation of acceptance, but it remanded the case for a determination of the appropriate setoff, based on a reasonable value of the buyers' use from the time of purchase.⁽²⁹⁷⁾

Unlike courts that have limited setoff to use following revocation,⁽²⁹⁸⁾ courts that have not distinguished between pre- and post-revocation use have provided little reasoning for their determinations.⁽²⁹⁹⁾ A possible basis for allowing pre-revocation use to be included in calculating an appropriate setoff may be found in the Code's requirement that a substantial change in the condition of goods, unless caused by the goods' own defects, terminates the right to revoke acceptance.⁽³⁰⁰⁾ The purpose of section 2-608(2) is to provide sellers with the ability to resell returned goods by requiring returned goods to be in sufficiently good condition.⁽³⁰¹⁾ It is also intended to prevent unjust enrichment to the buyer.⁽³⁰²⁾ Goods returned to the seller after long periods of use prior to revocation (because of difficulty in identifying the defects⁽³⁰³⁾ or because of the seller's attempts to cure)⁽³⁰⁴⁾ are used goods and thus have less value to the seller, even if there is no use following revocation of acceptance.⁽³⁰⁵⁾ Determining appropriate compensation to the seller for the diminished value of used goods is best accomplished by considering the period prior to revocation of acceptance, as well as post-revocation use.⁽³⁰⁶⁾ Otherwise, as one commentator noted, the buyer "gains as a private benefit the value of his use of the goods during his possession," which may encourage the seller to engage in protracted litigation or settlement discussions to avoid a revocation of acceptance.⁽³⁰⁷⁾ The court is then faced "with the dilemma of having to award the less efficient remedy or provide a windfall to the buyer."⁽³⁰⁸⁾

B. On What Should the Determination of Use Value Be Based?

After the court has determined that a setoff should be allowed, and assessed the setoff based on use either prior to or after revocation of acceptance, the court must then determine the appropriate value of this use.⁽³⁰⁹⁾ Since use value is based on the benefit received by a buyer, it may be difficult to establish a use value in the case of goods with substantial defects, because the buyer may have received little, if any, benefit.⁽³¹⁰⁾ The following cases illustrate some of the methods courts have utilized in determining the use value or lack of use value.⁽³¹¹⁾ Some courts have acknowledged the subjectivity in calculating use value,⁽³¹²⁾ while other courts have adopted an objective standard, giving no consideration for any decrease in use value, which the defect may have caused.⁽³¹³⁾

1. Troutman v. Pierce, Inc.

In Troutman v. Pierce, Inc.,⁽³¹⁴⁾ the Troutmans purchased a new mobile home from Pierce in March 1982.⁽³¹⁵⁾ The Troutmans had lived in their home for eighteen months before notifying the seller of their intention to revoke acceptance because of the substantial defects that they had discovered.⁽³¹⁶⁾ The defects included water seepage through the walls, which resulted in a replacement of some of the walls; a defective electrical socket in which water collected, which caused Mrs. Troutman to receive an electrical shock; and warped exterior siding.⁽³¹⁷⁾ The Troutmans continued to live in the home for three months after notifying the seller that they were revoking acceptance.⁽³¹⁸⁾ In their testimony, the Troutmans stated that the home was "`unfit for living'" and that they never would have rented a home in that condition.⁽³¹⁹⁾ Although the Troutmans had lived in the mobile home for twenty-one months, the jury found that they had received no reasonable value from their use.⁽³²⁰⁾ The Supreme Court of North Dakota refused to set aside the jury determination, holding that there was substantial evidence for its support.⁽³²¹⁾

In contrast, several years earlier this same court remanded the case of Erling v. Homera, Inc.,⁽³²²⁾ for a determination of a setoff to the seller of a mobile home.⁽³²³⁾ In its initial ruling, the trial court had been silent on the issue of allowing the seller a setoff.⁽³²⁴⁾ The Supreme Court of North Dakota, however, held that the seller was entitled to a setoff for the value of the use by the buyers from the date of purchase to the date of the hearing on remand.⁽³²⁵⁾

The defects found in both Troutmans' and Erlings' homes appear similar.⁽³²⁶⁾ A possible explanation for the differing outcomes in Troutman and Erling is that Erling was not tried before a jury.⁽³²⁷⁾ The Troutmans' testimony as to the uninhabitable condition of the home may have evoked sympathy from the jury.⁽³²⁸⁾ The Troutman case provides substantial support for the view of White and Summers that in some circumstances there will be no benefit to the buyer from use of the goods.⁽³²⁹⁾

2. Schaeffer v. Spampinato

In Schaeffer v. Spampinato,⁽³³⁰⁾ Schaeffer purchased a car for $10,500.⁽³³¹⁾ In the course of sale negotiations, the seller was asked whether the car had been wrecked or damaged.⁽³³²⁾ The seller indicated that he was unaware of any damage.⁽³³³⁾ After the buyer began experiencing difficulties with the car, she learned that the car had been severely damaged in an accident.⁽³³⁴⁾ Schaeffer brought an action against the dealer for breach of contract and fraud.⁽³³⁵⁾ The court found that her revocation of acceptance was justified, and that her continued use was reasonable.⁽³³⁶⁾ The trial court, sua sponte, reopened the case following the close of evidence to allow introduction of evidence concerning the reasonable use value received by Schaeffer from her continued use of the car after revocation of acceptance.⁽³³⁷⁾ The seller proposed that the value be assessed using twenty-eight cents per mile, a value used by the Internal Revenue Service.⁽³³⁸⁾ The buyer contended that the use value should be computed according to the National Automobile Dealers Association (NADA)⁽³³⁹⁾ book, which reflects the retail value of a car based on its mileage and condition.⁽³⁴⁰⁾ The trial court, without explaining its rationale, used ten cents per mile.⁽³⁴¹⁾ The court of appeals found that the trial court had not abused its discretion by reopening the case in order to allow evidence of the use value.⁽³⁴²⁾ Further, the appeals court found that it had not been an abuse of discretion to base that value on ten cents per mile, which fell between the twenty-eight cents offered by the seller, and the five cents per mile offered by the buyer.⁽³⁴³⁾

3. Johnson v. GMC, Chevrolet Motors Division

In Johnson v. GMC, Chevrolet Motors Division,⁽³⁴⁴⁾ following a determination that the Johnsons had effectively revoked acceptance of the truck,⁽³⁴⁵⁾ the trial court allowed a setoff in the amount of $4,702.94, which was based on the depreciation of the truck.⁽³⁴⁶⁾ The appellate court rejected this method, stating that this method would allow the seller to benefit from his refusal to accept the return of the vehicle.⁽³⁴⁷⁾ The court reasoned that because the depreciation method was based on time, the number of miles driven by the Johnsons would make no difference in the computation of the amount of the setoff.⁽³⁴⁸⁾ It was the Johnsons' continued use, not the time of possession, which formed the basis for the seller's right to a setoff.⁽³⁴⁹⁾ Therefore, in the court's view, the appropriate measure of the setoff was the value of the buyers' use.⁽³⁵⁰⁾ At trial, GMC had introduced a Federal Highway Administration booklet into evidence.⁽³⁵¹⁾ The Kansas Supreme Court used this booklet to determine that the cost of operating a similar van was 33.2 cents per mile.⁽³⁵²⁾ The court then deducted expenses already paid by the buyers⁽³⁵³⁾ to reach 10.7 cents per mile as the measure of use value to the buyers.⁽³⁵⁴⁾ The court considered only the mileage subsequent to revocation of acceptance in determining the amount of the setoff.⁽³⁵⁵⁾ By calculating the setoff in this manner, GMC's setoff was reduced from $4,702.94, as originally calculated by the trial court, to $1,564.23.⁽³⁵⁶⁾

4. Ford Motor Credit Co. v. Harper

In Ford Motor Credit Co. v. Harper,⁽³⁵⁷⁾ the court of appeals affirmed the district court's determination that Harper was entitled to a refund of his purchase price because his revocation of acceptance was justified.⁽³⁵⁸⁾ Although the seller would have been entitled to a setoff, it was not allowed because the seller failed to provide "some credible basis for calculating the value of Harper's beneficial use of the tractor."⁽³⁵⁹⁾ During the trial, the seller had offered expert testimony concerning the value of Harper's use of the tractor.⁽³⁶⁰⁾ The expert stated that based on the rental value of the tractor, the number of hours it had been used, and the size of Harper's farm,⁽³⁶¹⁾ the value of Harper's use was either in excess of $36,000 based on the number of hours used or $50,000 based on the monthly rental value.⁽³⁶²⁾ The appeals court found the expert's assessment of the value "grossly disproportional to any fair assessment of Harper's beneficial use."⁽³⁶³⁾ Because it was the seller's burden to establish a reasonable basis for the amount of the setoff, no setoff was allowed.⁽³⁶⁴⁾

In a number of cases involving revocation of acceptance by owners of mobile homes, courts have articulated a standard based on rental value.⁽³⁶⁵⁾ For example, in Keen v. Modern Trailer Sales, Inc.,⁽³⁶⁶⁾ the court noted that the seller would be entitled to "[a setoff] for the rental value of the possessed goods."⁽³⁶⁷⁾ In Pedrini v. Mid-City Trailer Depot, Inc.,⁽³⁶⁸⁾ the trial judge was directed, on remand, to determine "the reasonable rental value of the mobile home for the period that it was occupied by the Pedrinis."⁽³⁶⁹⁾ What is absent from these decisions, however, is a means or standard that could be used in calculating what should constitute a "reasonable rental value" for a defective home.⁽³⁷⁰⁾ Although market value may be one measure, as seen in Troutman v. Pierce, Inc.,⁽³⁷¹⁾ it is possible to receive no benefit from living in a defective home.⁽³⁷²⁾

  Completing the Damages Structure

Following the damage scheme to its equitable end, in assessing damages when a seller is allowed a setoff, the buyer should also be allowed interest on the purchase price in order to compensate for the seller's use of the buyer's money.⁽³⁷³⁾ In Johnson v. GMC, Chevrolet Motors Division,⁽³⁷⁴⁾ the court articulated it quite simply and effectively when it stated: "In terms of equity, if GMC takes advantage of a setoff, then it should be responsible for any prejudgment interest from the date of revocation."⁽³⁷⁵⁾ There are two factors that the court found should be considered in determining the computation of a prejudgment interest.⁽³⁷⁶⁾ First, the debt on which a prejudgment interest accrues arises as of the date of the revocation of acceptance.⁽³⁷⁷⁾ Second, the basis for a setoff does not arise until the goods have been used after the date of revocation of acceptance.⁽³⁷⁸⁾ Therefore, the prejudgment interest should be assessed before a setoff is granted to the seller.⁽³⁷⁹⁾

Similar to the benefit received by a buyer through the continued use of a good after revocation, the seller has received a benefit from use of the buyer's money.⁽³⁸⁰⁾ Since a setoff requires a buyer to return the benefit received from the use of goods, the seller should return the amount he or she realized through the use of the buyer's money.⁽³⁸¹⁾ Consideration of the depreciation of the goods (by allowing a setoff) and the appreciation of the money (by awarding interest on the purchase price) is important in working out a fair judgment.⁽³⁸²⁾

Additionally, a few courts, such as the Supreme Judicial Court of Massachusetts in Fortin v. Ox-Bow Marina,⁽³⁸³⁾ have allowed the buyer who has revoked acceptance to recover the sales tax that was paid on the goods. According to the Fortin court, the "sales tax [was] an expense `reasonably incurred in . . . receipt . . . of goods' in connection with which the buyer ha[d] effectively revoked acceptance, [and, therefore,] the tax [was] properly recoverable as incidental damages."⁽³⁸⁴⁾

  Conclusion

In the hypothetical at the start of this Note, Clint Smith, a car dealer, was faced with a request from Jess, one of his customers, to revoke her acceptance of a car and have her purchase price refunded.⁽³⁸⁵⁾ Clint was concerned because the car had a significant number of miles on it, and he would lose money if he was forced to take it back.⁽³⁸⁶⁾ If so forced, however, Clint believed that he should receive some form of payment or adjustment from Jess for her use of the car.⁽³⁸⁷⁾

Various cases discussed in this Note indicate that courts are willing to allow revocation of acceptance, despite even significant periods of use.⁽³⁸⁸⁾ Therefore, Jess's continued use of the car may not prove to be a bar to her successful revocation of acceptance. If she is successful, however, equity and the Code's goal of ensuring fairness in commercial transactions support Clint's seeking a setoff for the reasonable value of her use.⁽³⁸⁹⁾ The burden is clearly on Clint to affirmatively plead the allowance of a setoff, if he is unable to persuade the court that the revocation was untimely, or that the defects do not substantially impair the value of the car to Jess.⁽³⁹⁰⁾ Clint must produce sufficient evidence to show that despite the defects, Jess received some benefit from her use of the car.⁽³⁹¹⁾ Clint must also produce evidence as to the value of that use.⁽³⁹²⁾ Although expert testimony may not be necessary, Clint should present evidence from which an objective determination of the value of the use can be made.⁽³⁹³⁾ This could be in the form of government estimates of the cost of operating a car, a per-mile charge, or an adjustment for any time he provided Jess a "loaner" while her car was being repaired.⁽³⁹⁴⁾ Clint should keep in mind that overreaching in valuing Jess's benefit from the use of the car could result in no setoff.⁽³⁹⁵⁾

The spirit of the Code and its principles of fairness, in conjunction with the goal of providing guidelines to facilitate the smooth flow of commercial transactions, have been achieved by many courts through the incorporation of principles of equity under section 1-103. However, the process currently underway to revise Article 2 of the Code⁽³⁹⁶⁾ affords an ideal opportunity for incorporation of a setoff provision, either in a specific section or a comment to the Code.

Articulation of standards for courts to use in allowing a setoff, determining the time period, and valuing the use will encourage the award of setoffs. This will enhance the Code's fostering of fairness and equity. These guidelines would benefit buyers, sellers, lawyers, and the courts.

Carolyn F. Lazaris^*

1. See Johnson v. GMC, Chevrolet Motors Div., 668 P.2d 139, 141 (Kan. 1983).

2. See McCullough v. Bill Swad Chrysler-Plymouth, 449 N.E.2d 1289, 1291 (Ohio 1983).

3. See Johnson, 668 P.2d at 141.

4. See Moore v. Howard Pontiac-Am., Inc., 492 S.W.2d 227, 228 (Tenn. 1973).

5. See McCullough, 449 N.E.2d at 1291.

6. See id.

7. See id.

8. See id.

9. See Johnson v. GMC, Chevrolet Motors Div., 668 P.2d 139, 141 (Kan. 1983); McCullough, 449 N.E.2d at 1291; Moore v. Howard Pontiac-Am., Inc., 492 S.W.2d 227, 228 (Tenn. 1973).

10. See McCullough, 449 N.E.2d at 1291.

11. See Johnson, 668 P.2d at 146.

12. See McCullough, 449 N.E.2d at 1291.

13. See id. at 1291, 1293.

14. See U.C.C. § 2-608 (1995).

15. Id. This section, entitled "Revocation of Acceptance in Whole or in Part," provides for the following:

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

(a) on the reasonable assumption that its non-conformity would be cured and it has not been seasonably cured; or

(b) without discovery of such non-conformity 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.U.C.C. § 2-608 (1995).

16. Id.

17. See id.

18. See Johnson v. GMC, Chevrolet Motors Div., 668 P.2d 139, 146 (Kan. 1983).

19. "A `set-off' is a demand that the [seller] has against the [buyer] arising out of a transaction extrinsic to the [buyer's] cause of action . . . ." Inniss v. Methot Buick-Opel, Inc., 506 A.2d 212, 217 (Me. 1986). It is a "remedy employed by a [seller] to discharge or reduce the [buyer's] demand by an opposite one." Edmonds v. Stratton, 457 S.W.2d 228, 232 (Mo. Ct. App. 1970). Courts and commentators use the terms "offset" and "setoff" to reflect the same principle. For consistency, this Note will use "setoff," although the materials referenced may have used "offset."

20. See infra notes 26-142 and accompanying text.

21. See infra notes 46-61 and accompanying text.

22. See infra notes 143-255 and accompanying text.

23. See infra notes 256-372 and accompanying text.

24. See infra notes 373-84 and accompanying text.

25. See infra notes 385-95 and accompanying text.

26. U.C.C. § 1-102 (1995). This section, entitled "Purposes; Rules of Construction; Variation by Agreement," provides in part: "(1) This Act shall be liberally construed and applied to promote its underlying purposes and policies. (2) Underlying purposes and policies of this Act are . . . (b) to permit the continued expansion of commercial practices through custom, usage and agreement of the parties . . . ." Id.; see also Johnson v. GMC, Chevrolet Motors Div., 668 P.2d 139, 142 (Kan. 1983).

27. See U.C.C. § 2-508 (1995) (allowing seller to cure improper tender); id. § 2-609 (allowing either party, under certain circumstances, to demand assurances for the other party's performance); id. § 2-706 (allowing seller to resell goods following buyer's breach); id. § 2-712 (allowing buyer to cover through the purchase of substitute goods); id. § 2-718 (providing for restitution to breaching buyer of down payment, or portion thereof).

28. Id. § 1-103 ("Unless displaced by the particular provisions of this Act, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provisions.").

29. Id. § 1-106. This section states in part:

(1) The remedies provided by this Act shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or [sic] special nor penal damages may be had except as specifically provided in this Act or by other rule of law.Id. § 1-106(1).

30. See generally Ronald A. Anderson, Anderson on the Uniform Commercial Code, § 1-106:9, at 144 (3d ed. 1981). Judicial remedies under the Restatement (Second) of Contracts are designed to protect one or more of three interests of the promisee. Restatement (Second) of Contracts § 344 (1979). These remedies include an expectation interest (being put in as good a position as if the other party had fully performed); reliance interest (being reimbursed for any loss that was the result of reliance on the contract); and restitution interest (having restored any benefit given to the other party). Id.

31. U.C.C. § 1-106 (1995); see also Gawlick v. American Builders Supply, Inc., 519 P.2d 313, 314-15 (N.M. Ct. App. 1974) (involving a buyer of a car with a defective title who realized her expectation interest by recovering $1,360, which represented the $600 purchase price paid and the $760 difference between the purchase price and the market price); Roy R. Anderson, Monetary Recoveries for Reliance and in Restitution Under Article 2 of the UCC, 22 UCC L.J. 248, 249 (1990); Gary Monserud, Rounding Out the Remedial Structure of Article 2: The Case for a Forced Exchange Between a Buyer and a Remote Seller, 19 U. Dayton L. Rev. 353, 400 (1994).

32. Anderson, supra note 30, § 1-106:9.

33. Monserud, supra note 31, at 400.

34. See U.C.C. § 2-702 (1995) ("Seller's Remedies on Discovery of Buyer's Insolvency"); id. § 2-703 ("Seller's Remedies in General"); id. § 2-706 ("Seller's Resale Including Contract for Resale"); id. § 2-708 ("Seller's Damages for Non-acceptance or Repudiation"); id. § 2-711 ("Buyer's Remedies in General; Buyer's Security Interest in Rejected Goods"); id. § 2-712 ("`Cover'; Buyer's Procurement of Substitute Goods"); id. § 2-713 ("Buyer's Damages for Non-Delivery or Repudiation").

35. Id. § 2-601.

36. Id.

37. Id.

38. Id.

39. U.C.C. § 2-601 (1995). This section, entitled "Buyer's Rights on Improper Delivery," provides in relevant part: "Subject to the provisions of this Article . . . if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may (a) reject the whole . . . ." Id.

40. Id. § 2-607(2) ("Acceptance of goods by the buyer precludes rejection of the goods accepted . . . .").

41. Id. § 2-608. See supra note 15 for the text of U.C.C. § 2-608; see also George I. Wallach, The Buyer's Right to Return Unsatisfactory Goods--The Uniform Commercial Code Remedies of Rejection and Revocation of Acceptance, 20 Washburn L.J. 20, 21 (1980).

42. Wallach, supra note 41, at 21.

43. See U.C.C. § 2-714 (1995); James J. White & Robert S. Summers, Uniform Commercial Code, § 8-1 (4th ed. 1995).

44. U.C.C. § 2-714(2) (1995). For example, the buyer of an automobile with a defective part that will cost $300 to repair, will recover the $300 to reflect the decreased value of the car. See generally White & Summers, supra note 43, § 8-1.

45. U.C.C. § 2-711(1) (1995); see also White & Summers, supra note 43, § 8-1. In addition to the purchase price, remedies such as cover may be allowed. U.C.C. § 2-711(1)(a) (1995).

46. White & Summers, supra note 43, § 8-3, at 299.

47. See U.C.C. § 2-602(1) (1995).

48. Id. § 2-601. The buyer's right to reject is subject to the good faith requirement of section 1-203 and the seller's right of cure under section 2-508. See id. §§ 1-203, -508.

49. Id. § 2-601 (1995) (allowing for rejection if the goods fail to conform in any respect); see also White & Summers, supra note 43, § 8-3, at 300. "During the nineteenth century a rule developed that a buyer was entitled to reject goods unless the seller made a `perfect tender.' The requirement of perfection covered not only the quantity and quality of the goods but also the details of the shipment." E. Allan Farnsworth, Contracts § 8.12, at 621 (2d ed. 1990) (footnote omitted).

50. See U.C.C. § 2-601 (1995) (limiting the application of the perfect tender rule in installment contracts); id. § 2-508 (providing the seller the opportunity to cure prior to the time for delivery specified in the contract where the seller has delivered non-conforming goods with the expectation that they would be acceptable); id. § 2-612 (providing for rejection in installment contracts only when the defect substantially impairs the value of the installment and cannot be cured); id. § 2-504 (providing for rejection in a shipment contract that is late only if there is a material delay or loss occurs).

51. Id. § 2-602(1) ("Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.").

52. Id. § 2-603 ("Merchant Buyer's Duties as to Rightfully Rejected Goods"); id. § 2-604 ("Buyer's Options as to Salvage of Rightfully Rejected Goods").

53. Wallach, supra note 41, at 31; see also 1 Thomas D. Crandall et al., Uniform Commercial Code § 6.4, at 6:9 (1993). But see Yates v. Clifford Motors, Inc., 423 A.2d 1262, 1271 (Pa. Super. Ct. 1980) (considering the fact that the buyer had clearly limited use following rejection, and that the truck was necessary for transportation).

54. Wallach, supra note 41, at 31; see also supra notes 42-44 and accompanying text.

55. U.C.C. § 2-608 (1995); see also William D. Hawkland, Uniform Commercial Code Series § 2-608:02, at 128-29 (1994).

56. U.C.C. § 2-606 (1995).

57. Id.; see also Wallach, supra note 41, at 32.

58. U.C.C. § 2-608(3) (1995).

59. The test of substantial impairment includes a subjective element regarding whether the value is substantially impaired to the particular buyer. Jorgensen v. Pressnall, 545 P.2d 1382, 1385 (Or. 1976).

60. U.C.C. § 2-608 (1995); see also Roy R. Anderson, Damages Under the Uniform Commercial Code § 3:13 (1992).

61. U.C.C. § 2-608(2) (1995). See supra note 15 for the text of U.C.C. § 2-608 (1995).

62. See Jacobs v. Rosemount Dodge-Winnebago S., 310 N.W.2d 71 (Minn. 1981) (allowing revocation 12 months after delivery of motor home); Ybarra v. Modern Trailer Sales, Inc., 609 P.2d 331 (N.M. 1980) (allowing revocation four years after acceptance of mobile home); Troutman v. Pierce, Inc., 402 N.W.2d 920 (N.D. 1987) (allowing revocation 18 months after purchase of mobile home).

63. U.C.C. § 2-608 (1995). See supra note 15 for the text of U.C.C. § 2-608; see also Hawkland, supra note 55, § 2-608:05, at 178.

[T]he right to revoke ends once the goods have undergone a substantial change in condition not caused by their own defects. The purpose of this rule is to prevent unjust enrichment of the buyer through the use of the goods to the point of substantial deterioration or depreciation not caused by their nonconformities.Hawkland, supra note 55, § 2-608:05, at 178 (footnote omitted).

64. See Stroh v. American Recreation & Mobile Home Corp., 530 P.2d 989 (Colo. Ct. App. 1975) (one year); Conte v. Dwan Lincoln-Mercury, Inc., 374 A.2d 144 (Conn. 1976) (one year); Durfee v. Rod Baxter Imports, Inc., 262 N.W.2d 349 (Minn. 1977) (nine months); Erling v. Homera, Inc., 298 N.W.2d 478 (N.D. 1980) (twenty months).

65. See Ex parte Stem, 571 So. 2d 1112 (Ala. 1990); Page v. Dobbs Mobile Bay, Inc., 599 So. 2d 38 (Ala. Civ. App. 1992); Johnson v. GMC, Chevrolet Motors Div., 668 P.2d 139 (Kan. 1983); Johannsen v. Minnesota Valley Ford Tractor Co., 304 N.W.2d 654 (Minn. 1981); Lawrence v. Modern Mobile Homes, Inc., 562 S.W.2d 729 (Mo. Ct. App. 1978); Jorgensen v. Pressnall, 545 P.2d 1382 (Or. 1976).

66. See, e.g., Mobile Home Sales Management, Inc. v. Brown, 562 P.2d 1378, 1381 (Ariz. Ct. App. 1977); Keen v. Modern Trailer Sales, Inc., 578 P.2d 668, 670 (Colo. Ct. App. 1978); Erling v. Homera, Inc., 298 N.W.2d 478, 483 (N.D. 1980). Under section 2-711 of the Code, following a justifiable revocation, "a buyer has a security interest in goods in his possession or control for any payments made on their price." U.C.C. § 2-711(3) (1995).

67. Mobile Home Sales Management, 562 P.2d at 1382.

68. Id. U.C.C. § 2-711(3) (1995) provides for the following:

On rightful rejection or justifiable revocation of acceptance a buyer has a security interest in goods in his possession or control for any payments made on their price and any expenses reasonably incurred in their inspection, receipt, transportation, care and custody and may hold such goods and resell them in like manner as an aggrieved seller.Id.

69. See generally George L. Priest, Breach and Remedy for the Tender of Nonconforming Goods Under the Uniform Commercial Code: An Economic Approach, 91 Harv. L. Rev. 960 (1978). In this article, Professor Priest reviewed 183 cases reported between 1954 and 1976. Id. at 982. Of these cases, 78 involved rejection and 99 involved revocation of acceptance. Id. Professor Priest found that consumer suits accounted for 56% of the revocation cases but for only 29% of the rejection cases. Id. at 997. However, in 1974, Congress passed the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act, 15 U.S.C. §§ 2301-2312 (1994). This Act, aimed solely at consumer products, specifies standards which must be met in written warranties. 15 U.S.C. § 2301 (1994). Under the Magnuson-Moss Act, a warrantor (seller) must provide either a refund or a replacement to the consumer if a product is defective and if the warrantor is unable to repair the product. Id. § 2304(a)(4). To supplement the protections of the Magnuson-Moss Act, a number of states enacted "lemon laws" designed to protect buyers of new cars. Richard L. Coffinberger & Linda B. Samuels, Legislative Responses to the Plight of New Car Purchasers, 18 UCC L.J. 168, 176 (1985). These laws also provide for a refund "if the defect substantially impairs the value or utility of the vehicle and [it] cannot be repaired within a reasonable number of attempts." Id. Thus, the use of revocation of acceptance as a remedy in this type of case may decline, as the Magnuson-Moss Act and state "lemon laws" provide new car owners with an alternative to section 2-608. Monserud, supra note 31, at 405-13. Arizona, for example, has modified its version of § 2-608 to exclude new motor vehicles. Ariz. Rev. Stat. Ann. § 47-2608D (1995).

70. See generally Ex parte Stem, 571 So. 2d 1112 (Ala. 1990) (car); Stroh v. American Recreation & Mobile Home Corp., 530 P.2d 989 (Colo. Ct. App. 1975) (mobile home); Johnson v. GMC, Chevrolet Motors Div., 668 P.2d 139 (Kan. 1983) (truck); Lawrence v. Modern Mobile Homes, Inc., 562 S.W.2d 729 (Mo. Ct. App. 1978) (mobile home).

71. Priest, supra note 69, at 979; see also Wallach, supra note 41, at 36-37.

72. See generally Ex parte Stem, 571 So. 2d 1112 (Ala. 1990); Conte v. Dwan Lincoln-Mercury, Inc., 374 A.2d 144 (Conn. 1976); Orange Motors of Coral Gables, Inc. v. Dade County Dairies, Inc., 258 So. 2d 319 (Fla. Dist. Ct. App. 1972), cert. denied, 263 So. 2d 831 (Fla. 1972); Durfee v. Rod Baxter Imports, Inc., 262 N.W.2d 349 (Minn. 1977).

73. Section 2-508 of the Code is the basic cure section and allows the seller the opportunity to cure when the buyer rejects. See U.C.C. § 2-508 (1995). Although there is no mention of a similar right when a buyer revokes, many courts permit such attempts, considering "timeliness, inconvenience, risk, shaken faith and the like." Hawkland, supra note 55, at § 2-608:03, at 142. In Fitzner Pontiac-Buick-Cadillac, Inc. v. Smith, 523 So. 2d 324, 328 (Miss. 1988), the Mississippi Supreme Court held that revocation by the car buyer could not be effective unless the seller were given a reasonable opportunity to cure defects.

74. See generally North River Homes, Inc. v. Bosarge, 594 So. 2d 1153 (Miss. 1992); McCullough v. Bill Swad Chrysler-Plymouth, 449 N.E.2d 1289 (Ohio 1983). Although under U.C.C. § 2-711 (1995), a buyer can resell the goods, cars and mobile homes depreciate rapidly, and it is unlikely that an equivalent item can be purchased with an amount obtained through a resale, unless the buyer recovers the purchase price paid to the original seller. Wallach, supra note 41, at 37.

75. Necessaries have been defined as follows:

Necessaries consist of food, drink . . . and a suitable place of residence, and they are regarded as necessaries in the absolute sense of the word. However, liability for necessaries is not limited to articles required to sustain life; it extends to articles which would ordinarily be necessary and suitable, in view of the . . . earning capacity, and mode of living of the individual involved.Black's Law Dictionary 1029 (6th ed. 1990). Today, this would also clearly include vehicles; "[w]ith little or no low-cost public transportation available to the public, private transportation has changed from a luxury to a necessity." Johnson v. GMC, Chevrolet Motors Div., 668 P.2d 139, 143 (Kan. 1983).

76. See, e.g., Ex parte Stem, 571 So. 2d 1112 (Ala. 1990); Stroh v. American Recreation & Mobile Home Corp., 530 P.2d 989 (Colo. Ct. App. 1975); North River Homes, Inc. v. Bosarge, 594 So. 2d 1153 (Miss. 1992); Lawrence v. Modern Mobile Homes, Inc., 562 S.W.2d 729 (Mo. Ct. App. 1978); McCullough v. Bill Swad Chrysler-Plymouth, 449 N.E.2d 1289 (Ohio 1983); see also White & Summers, supra note 43, § 8-4, at 318.

77. See, e.g., Mobile Home Sales Management, Inc. v. Brown, 562 P.2d 1378 (Ariz. Ct. App. 1977); Johannsen v. Minnesota Valley Ford Tractor Co., 304 N.W.2d 654 (Minn. 1981); Pavesi v. Ford Motor Co., 382 A.2d 954 (N.J. Super. Ct. Ch. Div. 1978), overruled on other grounds by Ramirez v. Autosport, 440 A.2d 1345 (N.J. 1982).

78. See infra notes 79-115 and accompanying text.

79. McCullough v. Bill Swad Chrysler-Plymouth, 449 N.E.2d 1289 (Ohio 1983).

80. Id. at 1290.

81. Id. at 1291.

82. Id.

83. Id.

84. McCullough, 449 N.E.2d at 1291.

85. Id.

86. Id.

87. Id.

88. Id. "Rescission" is a term often used by courts when considering revocation of acceptance. See Keen v. Modern Trailer Sales, Inc., 578 P.2d 668, 669-70 (Colo. Ct. App. 1978); Jorgensen v. Pressnall, 545 P.2d 1382, 1384 (Or. 1976). Comment one under section 2-608 of the Code notes that

the section no longer speaks of "rescission," a term capable of ambiguous application either to transfer of title to the goods or to the contract of sale and susceptible also of confusion with cancellation for cause of an executed or executory portion of the contract. The remedy under this section is instead referred to simply as "revocation of acceptance."

U.C.C. § 2-608 cmt. 1 (1995). See White & Summers, supra note 43, § 8-4, at 312, which states the following:

[T]he term "revocation of acceptance" was new, and during the early years of the Code the courts did not take to it. What the drafters would call revocation of acceptance and would analyze under 2-608, the courts would sometimes define as rescission or rejection and discuss without reference to the provisions of 2-608.

White & Summers, supra note 43, § 8-4, at 312.

89. McCullough, 449 N.E.2d at 1291.

90. Id.

91. Id. at 1292.

92. Id. at 1291.

93. Id. at 1292.

94. McCullough, 449 N.E.2d at 1292-93. The court followed the lead of the following courts: Mobile Home Sales Management, Inc. v. Brown, 562 P.2d 1378 (Ariz. Ct. App. 1977); Johannsen v. Minnesota Valley Ford Tractor Co., 304 N.W.2d 654 (Minn. 1981); Pavesi v. Ford Motor Co., 382 A.2d 954 (N.J. Super. Ct. Ch. Div. 1978), overruled on other grounds by Ramirez v. Autosport, 440 A.2d 1345 (N.J. 1982).

95. McCullough, 449 N.E.2d at 1293. In Liarikos v. Mello, 418 Mass. 669, 675, 639 N.E.2d 716, 719 (1994), the Supreme Judicial Court of Massachusetts held that continued reasonable use would not, as a matter of law, bar the buyer from revoking acceptance if special circumstances were to exist and if the buyer's use was reasonable. "What constitutes reasonable use is a question of fact for the jury which must be decided under the circumstances of each case." Id. The court articulated several factors that a jury should be instructed to consider in determining whether the continued use was reasonable. Id. Specifically, the court noted that the following factors are to be weighed:

"[T]he seller's instructions to the buyer after revocation of acceptance; the degree of economic and other hardship that the buyer would suffer if he discontinued using the defective goods; the reasonableness of the buyer's use after revocation as a method of mitigating damages; the degree of prejudice to the seller and whether the seller acted in bad faith."Id., 639 N.E.2d at 719-20 (quoting Johannsen v. Minnesota Valley Ford Tractor Co., 304 N.W.2d 654, 658 (Minn. 1981)).

96. McCullough, 449 N.E.2d at 1293.

97. Id.

98. Id. The court noted that at the time of the notice of revocation, the car "had been driven only 12,000 miles [and] could have easily been resold." Id.

99. North River Homes, Inc. v. Bosarge, 594 So. 2d 1153, 1161 (Miss. 1992).

100. Id. at 1159.

101. Id. at 1155. The defects included loose molding in the trailer, leaking water which caused "the trailer's underside to `balloon downward,'" a leak in the shower, a warped bathroom door, failed heating and cooling systems, ice on the floor, air coming in through the sockets, hot water backed up into the cold water pipe causing hot water to come out of both the hot and cold water taps, and a roof which rumbled when the wind blew. Id. at 1155-56.

102. Id. at 1156.

103. Id. Although the Code provides for an opportunity to cure when the buyer seeks to reject, see supra note 73, there is no similar provision in the Code that allows a seller the right to cure following revocation, nor is it clear that § 2-508 applies to revocation as well as to rejection. White & Summers, supra note 43, § 8-5, at 320-21. The court in Bosarge, however, noted that under Mississippi law, the buyer must give the seller an opportunity to cure the defects following notice of revocation. North River Homes, 594 So. 2d at 1161 (citing Miss. Code Ann. § 75-2-508 (1972)). Compare Johannsen v. Minnesota Valley Ford Tractor Co., 304 N.W.2d 654, 657 (Minn. 1981), in which the court held that a seller had "no right to cure defects that substantially impair the good's value." For cases that found that the seller had no right to cure, see White & Summers, supra note 43, § 8-5, at 320 n.2. For cases that take the position of Bosarge, see id. § 8-5, at 320 n.3; Hawkland, supra note 55, § 2-608:03, at 141-42 (quoting Jerry Phillips, Revocation of Acceptance and the Consumer Buyer, 5 Comm. L.J. 354, 358 (1970)).

104. North River Homes, 594 So. 2d at 1156.

105. Id. at 1157.

106. Id. at 1160-61.

107. Id. at 1158 (footnote omitted).

108. See id. at 1159. Seventeen months later, the Bosarges' attorney also wrote to North River Homes stating that the Bosarges were revoking acceptance. Id. at 1158. However, the October letter was considered by the court to be the notice of revocation. See id. at 1159-61.

109. North River Homes, 594 So. 2d at 1161.

110. Id. If the Bosarges' actions were found to constitute a waiver of their revocation of acceptance, their damages would have been limited to those recoverable for breach of warranty. See supra notes 42-44 and accompanying text.

111. North River Homes, 594 So. 2d at 1161-62.

112. Id.

113. Id. at 1161 (second alteration in original) (quoting testimony of Martha Bosarge).

114. See supra note 19 for a definition of "setoff."

115. North River Homes, 594 So. 2d at 1162.

116. See supra notes 92-98, 110-15 and accompanying text.

117. See supra notes 85-87, 103-06 and accompanying text.

118. U.C.C. § 2-711(1) (1995), entitled "Buyer's Remedies in General; Buyer's Security Interest in Rejected Goods," provides in part:

(1) Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance then with respect to any goods involved, and with respect to the whole if the breach goes to the whole contract (Section 2-612), the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid

(a) "cover" and have damages under the next section as to all the goods affected whether or not they have been identified to the contract; or

(b) recover damages for non-delivery as provided in this Article (Section 2-713).Id. Code remedies are supplemented by principles of law and equity. Id. § 1-103; see also supra note 28 and accompanying text.

119. U.C.C. § 2-711(1) (1995).

120. Id.

121. Id. § 2-711(1)(a). Cover allows the buyer to make a good faith purchase of substitute goods. Id. § 2-712; see also Anderson, supra note 60, § 7:02, at 4-5.

122. U.C.C. § 2-713 (1995); see also Anderson, supra note 60, § 7:02, at 5.

123. See U.C.C. §§ 2-712 to -713, -715 (1995); see also Anderson, supra note 60, § 7:02, at 5.

124. U.C.C. § 1-106 (1995); see also Monserud, supra note 31, at 400.

125. White & Summers, supra note 43, § 8-3, at 306-07.

126. See supra notes 76-115 and accompanying text.

127. See supra notes 76-115 and accompanying text; see also White & Summers, supra note 43, § 8-3, at 311 nn.33 & 34.

128. Priest, supra note 69, at 979.

129. Wallach, supra note 41, at 38.

130. U.C.C. § 2-711(1) (1995) (providing that the buyer may recover as much of the purchase price as paid, in addition to cover or damages for non-delivery and incidental and consequential damages).

131. See Hawkland, supra note 55, § 2-608:05, at 178-79; Priest, supra note 69, at 979.

132. White & Summers, supra note 43, § 8-3, at 310; Priest, supra note 69, at 979 ("An obvious oversight in the drafting of section 2-608 is that the Code does not compensate the seller for the depreciation of the goods, or for the buyer's use of them, during the period after acceptance and before revocation.").

133. See generally Triad Sys. Corp. v. Alsip, 880 F.2d 247 (10th Cir. 1989) (per curiam); Ford Motor Credit Co. v. Harper, 671 F.2d 1117 (8th Cir. 1982); Ex parte Stem, 571 So. 2d 1112 (Ala. 1990); Page v. Dobbs Mobile Bay, Inc., 599 So. 2d 38 (Ala. Civ. App. 1992); Stroh v. American Recreation & Mobile Home Corp., 530 P.2d 989 (Colo. Ct. App. 1975); Tom Bush Volkswagen, Inc. v. Kuntz, 429 So. 2d 398 (Fla. Dist. Ct. App. 1983); Johnson v. GMC, Chevrolet Motors Div., 668 P.2d 139 (Kan. 1983); Lawrence v. Modern Mobile Homes, Inc., 562 S.W.2d 729 (Mo. Ct. App. 1978).

134. See Priest, supra note 69, at 979; see also White & Summers, supra note 43, § 8-3, at 310 (noting that the Code does not expressly provide for a right of offset); Phillips, supra note 103, at 357 ("In all cases of revocation after any significant use by the buyer, the seller should be able to recover from the buyer in restitution for the fair value of any benefit conferred as a result of such use."). According to White & Summers:

[C]ases cited . . . include many buyers long in possession of goods before rejection or revocation. In many of those cases the buyer received an undisputed benefit from using the goods. In these cases the buyer should be made to pay the seller the value of the use; in fact "payment" will frequently come in the form of a setoff by the seller against the buyer when the buyer sues for return of the purchase price.White & Summers, supra note 43, § 8-3, at 310 (footnote omitted).

135. See infra notes 195-241 and accompanying text.

136. See supra note 27 and accompanying text.

137. See White & Summers, supra note 43, § 8-3, at 311; see also supra notes 74-115 and accompanying text. See generally Mobile Home Sales Management, Inc. v. Brown, 562 P.2d 1378 (Ariz. Ct. App. 1977); Erling v. Homera, Inc., 298 N.W.2d 478 (N.D. 1980).

138. See, e.g., Ex parte Stem, 571 So. 2d 1112 (Ala. 1990); Mobile Home Sales Management, Inc. v. Brown, 562 P.2d 1378 (Ariz. Ct. App. 1977); see also Hawkland, supra note 55, § 2-608:05, at 186 n.5; Wallach, supra note 41, at 37. The allowance of a setoff, despite the failure of the Code to explicitly provide for it, "allows the liberal employment of revocation without unfairly enriching the buyer or doing other injustice to the seller. It also has the economic advantage of minimizing costs where the goods have a greater value in the seller's hands than in the buyer's." Hawkland, supra note 55, § 2-608:05, at 179.

139. See supra note 132 and accompanying text.

140. Compare Stroh v. American Recreation & Mobile Home Corp., 530 P.2d 989 (Colo. Ct. App. 1975) (allowing setoff) with Sanborn v. Aranosian, 409 A.2d 1352 (N.H. 1979) (not allowing setoff); see also infra notes 144-92 and accompanying text.

141. See, e.g., Triad Sys. Corp. v. Alsip, 880 F.2d 247 (10th Cir. 1989) (per curiam) (setoff allowed for use prior to revocation); Johnson v. GMC, Chevrolet Motors Div., 668 P.2d 139 (Kan. 1983) (setoff allowed for use after revocation); Erling v. Homera, Inc., 298 N.W.2d 478 (N.D. 1980) (setoff computed from date of purchase).

142. See, e.g., Johnson v. GMC, Chevrolet Motors Div., 668 P.2d 139 (Kan. 1983) (setoff based on per-mile charge); Jorgensen v. Pressnall, 545 P.2d 1382 (Or. 1976) (setoff based on rental value of mobile home).

143. See, e.g., Stridiron v. I.C., Inc., 578 F. Supp. 997 (D.V.I. 1984); Barco Auto Leasing Corp. v. House, 520 A.2d 162 (Conn. 1987); Sanborn v. Aranosian, 409 A.2d 1352 (N.H. 1979).

144. Sanborn v. Aranosian, 409 A.2d 1352 (N.H. 1979).

145. Id. at 1353.

146. Id.

147. Id.

148. Id.

149. Sanborn, 409 A.2d at 1353. This is consistent with the buyer's right of resale under § 2-711(3), which provides that upon a justifiable revocation, the buyer may resell the goods in accordance with § 2-706 (Seller's Resale Including Contract for Resale). See U.C.C. § 2-711(3) (1995).

150. Sanborn, 409 A.2d at 1353.

151. Id.

152. Id.

153. Id. The Sanborns were awarded $2,105. Id. The provisions of the New Hampshire version of the Uniform Commercial Code used by the master were New Hampshire Revised Statutes Annotated sections 382-A:2-711 and 382-A:2-706. Id. These are identical to the respective U.C.C. sections. Compare N.H. Rev. Stat. Ann. §§ 382-A:2-706, -711 (1994) with U.C.C. §§ 2-711, -706 (1995).

154. Sanborn, 409 A.2d at 1353. The New Hampshire Revised Statutes Annotated § 382-A:2-714 is identical to U.C.C. § 2-714. Compare N.H. Rev. Stat. Ann. § 382-A:2-714 (1994) with U.C.C. § 2-714 (1995).

155. Sanborn, 409 A.2d at 1354.

156. N.H. Rev. Stat. Ann. § 382-A:2-711 (1994).

157. Sanborn, 409 A.2d at 1354. In allowing a setoff, the court in Johnson v. GMC, Chevrolet Motors Div., 668 P.2d 139, 145 (Kan. 1983), distinguished Sanborn by noting that Sanborn applied to use prior to revocation. This distinction appears to carry little weight with other courts, however, because setoffs have been allowed for use both prior and subsequent to revocation. See, e.g., Triad Sys. Corp. v. Alsip, 880 F.2d 247, 248 (10th Cir. 1989) (per curiam) (allowing setoff for use prior to revocation); Johannsen v. Minnesota Valley Ford Tractor Co., 304 N.W.2d 654, 658 (Minn. 1981) (allowing setoff for use after revocation).

158. Barco Auto Leasing Corp. v. House, 520 A.2d 162 (Conn. 1987).

159. Id. at 163.

160. Id. A rider is "[a] schedule or small piece of paper reflecting an amendment, addition or endorsement annexed to some part of a contract . . . . Such are deemed to be incorporated into the terms of the document." Black's Law Dictionary 1323 (6th ed. 1990).

161. Barco Auto Leasing Corp., 520 A.2d at 163-64. Although there was no allegation that the car was defective, the court drew an analogy to the Code's provisions for revocation of acceptance to determine the appropriate measure of damages. Id. at 166.

162. Conn. Gen. Stat. Ann. §§ 42-83 to -100a (West 1992 & Supp. 1995) (§§ 42-83 to -84 transferred to Conn. Gen. Stat. Ann. §§ 36a-770 to -771 (West Supp. 1996); §§ 42-84a to -84b transferred to Conn. Gen. Stat. Ann. §§ 42-100b to -100c (West Supp. 1996); §§ 42-85 to -100a transferred to Conn. Gen. Stat. Ann. §§ 36a-772 to -788 (West Supp. 1996)).

163. Barco Auto Leasing Corp., 520 A.2d at 164. The section of RISFA alleged to have been violated provides that:

Definitions. In this chapter, unless the context or subject matter otherwise requires . . . (d) "Retail installment sale" means any sale evidenced by a retail installment contract or installment loan contract wherein a retail buyer buys goods from a retail seller at a time sale price payable in two or more installments. The cash price of the goods, the amount, if any, included for other itemized charges which are included in the amount of the credit extended but which are not part of the finance charge under chapter 657 and the finance charge shall together constitute the time sale price.Id. at 164 n.2 (quoting Conn. Gen. Stat. § 42-83(3)(d) (transferred to Conn. Gen. Stat. Ann. § 36a-770 (West Supp. 1996))). This section of RISFA was designed to protect consumers from unknowingly assuming excessive financing charges. Id.

164. Id. at 164. The court found a number of unfair and deceptive practices, including that the lease was in fact a contract for sale; financing charges had been concealed as lease payments; the final payment was more than ten times the amount of the regular payments; the total amount for which House was liable had not been disclosed; and the total amount charged under the agreement far exceeded the price of the car. Id. The trial court initially awarded punitive damages of twice the actual damages. Id. On retrial of the damages issue, however, the trial court held that misstatements by House were a contributing factor to, if not the cause of, the violations, and declined to award punitive damages. Id. at 165.

165. Id. at 166.

166. Id. at 164.

167. Id. at 165.

168. Barco Auto Leasing Corp., 520 A.2d at 166.

169. Conn. Gen. Stat. Ann. § 42a-2-608 (West 1990).

170. Barco Auto Leasing Corp., 520 A.2d at 166.

171. Id. at 167. Under § 2-718(2) of the Code, a buyer who is in breach is entitled to restitution if his payments exceed the liquidated amount or "twenty percent of the value of the total performance . . . or $500, whichever is smaller." U.C.C. § 2-718(2) (1995). Section 2-718(3) subjects this right of restitution to a setoff if the seller establishes a right to damages under a section other than § 2-718(1), and is able to show that "the amount or value of benefits received by the buyer . . . [were] by reason of the contract." Id. § 2-718(3)(b).

172. Barco Auto Leasing Corp., 520 A.2d at 167 n.5.

173. Id.

174. Id. at 169.

175. Id. at 167 (citing Conn. Gen. Stat. § 42a-1-103 (1987)). Although House had received a benefit from use of the car by driving it 65,000 miles, and although the court acknowledged that misrepresentations of House were a factor in RISFA violations, the court held that a setoff was not appropriate after it balanced remedial provisions of RISFA against any benefit Barco had received from a resale of the car. Id. at 168-69. While Barco could be viewed as involving an act of fraud or deception on the part of Barco, neither Stridiron v. I.C., Inc., 578 F. Supp. 997 (D.V.I. 1984), nor Sanborn v. Aranosian, 409 A.2d 1352 (N.H. 1987), cited by Barco, 520 A.2d at 167, in support of denying a setoff, involved deception or fraud. See infra part III.A.3 for a discussion of Stridiron; see supra part III.A.1 for a discussion of Sanborn.

176. Stridiron v. I.C., Inc., 578 F. Supp. 997 (D.V.I. 1984).

177. Id. at 1000.

178. Id. at 999.

179. Id.

180. Id. In the first two weeks, the car had an oil leak which took five days to fix; two months later, the roller gears in the electric sun roof had to be replaced; one month later Stridiron brought it in because it had stalled in third gear. Id. This last repair took two months. Id. Three days after this "repair," the car had to be towed because it would not start. Id. Again repairs took two months. Id. The buyer returned the keys when the car was brought in the last time and never retrieved the car. Id.

181. Stridiron, 578 F. Supp. at 1002.

182. Id. at 1002-03.

183. Id. at 1002. The district court had no difficulty in finding that the tinted windows and the stereo system Stridiron had installed did not represent a substantial change in condition. See id.

184. Id.

185. Id.

186. Stridiron, 578 F. Supp. at 1002.

187. Id.

188. Id.

189. Id. The trial court additionally refused to consider the issue of setoff because setoff had been neither pled nor proven. Id.

190. Id. at 1003. The court noted the following authorities for support of a setoff: Mobile Home Sales Management, Inc. v. Brown, 562 P.2d 1378 (Ariz. Ct. App. 1977); Orange Motors v. Dade County Dairies, Inc., 258 So. 2d 319 (Fla. Dist. Ct. App. 1972); Lawrence v. Modern Mobile Homes, Inc., 562 S.W.2d 729 (Mo. Ct. App. 1978); Pavesi v. Ford Motor Co., 382 A.2d 954 (N.J. Super. Ct. Ch. Div. 1978), overruled on other grounds by Ramirez v. Autosport, 440 A.2d 1345 (N.J. 1982); Jorgensen v. Pressnall, 545 P.2d 1382 (Or. 1976); White & Summers, supra note 43, § 317 (2d ed. 1980); Priest, supra note 69.

191. Stridiron, 578 F. Supp. at 1002 n.3 (citing Pavesi v. Ford Motor Co., 382 A.2d 954 (N.J. Super. Ct. Ch. Div. 1978), overruled on other grounds by Ramirez v. Autosport, 440 A.2d 345 (N.J. 1982); Germain v. Crown, 9 V.I. 501, 506 (1973)). In Pavesi, the parties stipulated to a 6.5 cents per-mile charge for the computing of a setoff for the seller. Pavesi, 382 A.2d at 957.

192. Stridiron, 578 F. Supp. at 1003.

193. See Priest, supra note 69, at 979; supra note 28 and accompanying text.

194. See infra notes 195-241 and accompanying text.

195. Stroh v. American Recreation & Mobile Home Corp., 530 P.2d 989 (Colo. Ct. App. 1975).

196. Id. at 991.

197. Id.

198. Id.; see also supra note 88.

199. Stroh, 530 P.2d at 993.

200. Id.

201. Id.

202. Id. Under § 2-401(4) of the Code, the action of a "justifi[able] revocation of acceptance revests title to the goods in the seller." U.C.C. § 2-401(4) (1995). Under § 2-711(3) of the Code:

[Upon] rightful rejection or justifiable revocation of acceptance a buyer has a security interest in goods in his possession or control for any payments made on their price and any expenses reasonably incurred in their inspection, receipt, transportation, care and custody and may hold such goods and resell them in like manner as an aggrieved seller . . . .Id. § 2-711(3).

203. Stroh, 530 P.2d at 993.

204. Id. The duties and obligations of a buyer who revokes, are the same as the duties and obligations imposed upon a buyer who has rejected goods. Id.; see also U.C.C. § 2-608(3) (1995) ("A buyer who . . . revokes has the same rights and duties with regard to the goods involved as if he had rejected them."); id. § 2-602(2)(a) (noting that any exercise of ownership after rejection is wrongful against the seller).

205. Stroh, 530 P.2d at 993. Section 2-604 of the Code provides:

If the seller gives no instructions within a reasonable time after notification of rejection the buyer may store the rejected goods for the seller's account or reship them to him or resell them for the seller's account with reimbursement as provided in the preceding section. Such action is not acceptance or conversion.U.C.C. § 2-604 (1995).

206. Stroh, 530 P.2d at 993.

207. Id. (citing Colo. Rev. Stat. § 155-1-103 (1963)).

208. Id.

209. Id. at 993-94.

210. Id. at 994.

211. Moore v. Howard Pontiac-Am., Inc., 492 S.W.2d 227 (Tenn. Ct. App. 1972).

212. Id. at 228.

213. Id.

214. Id.

215. Id.

216. Moore, 492 S.W.2d at 228.

217. Id.

218. Id. at 229.

219. Id. at 230 (omission in original).

220. Id. (citing Staggs v. Herff Motor Co., 390 S.W.2d 245, 250 (Tenn. 1965)).

221. Moore, 492 S.W.2d at 230.

222. Johnson v. GMC, Chevrolet Motors Div., 668 P.2d 139, 141 (Kan. 1983).

223. Id. at 141.

224. Id.

225. Id.

226. Id.

227. Johnson, 668 P.2d at 141.

228. Id. at 142. See infra notes 272-76 and accompanying text for a discussion regarding the basis used by the trial court to determine the appropriate value of the setoff.

229. Johnson, 668 P.2d at 143.

230. Id. at 145.

231. Id. at 142.

232. Id.

233. Stroh v. American Recreation & Mobile Home Corp., 530 P.2d 989, 993-94 (Colo. Ct. App. 1975). See supra part III.B.1 for a discussion of Stroh.

234. Johnson, 668 P.2d at 143; see also supra note 205.

235. Johnson, 668 P.2d at 143.

236. Id.

237. Id. at 144 (citing Stroh, 530 P.2d at 993-94). See supra notes 200-10 for a discussion of the reasoning set forth in Stroh. Other cases that have used this reasoning include Ex parte Stem, 571 So. 2d 1112, 1116 (Ala. 1990); Lawrence v. Modern Mobile Homes, Inc., 562 S.W.2d 729, 733 (Mo. Ct. App. 1978); Pavesi v. Ford Motor Co., 382 A.2d 954, 957 (N.J. Super. Ct. Ch. Div. 1978), overruled on other grounds by Ramirez v. Autosport, 440 A.2d 1345 (N.J. 1982).

238. Johnson, 668 P.2d at 144-45.

239. Sanborn v. Aranosian, 409 A.2d 1352 (N.H. 1979). See supra part III.A.1 for a discussion of Sanborn.

240. Id. at 145; see also supra part III.A.1. The buyers in Sanborn retained the car for almost three months following revocation. See Sanborn, 409 A.2d at 1353. It is unclear whether the defects in the car were such that the car was unusable, but given that almost three months had elapsed between the Sanborns' notice of revocation and their resale, it is possible that at least some of the 17,000 miles for which the seller sought a setoff, were miles driven subsequent to revocation. See id. The Sanborn decision simply states that "RSA 382-A:2-711 does not allow setoff of any benefit which plaintiffs received by having the use of the car." Id. at 1354.

241. Johnson, 668 P.2d at 145.

242. Anderson, supra note 31, at 249.

243. See supra notes 30-33 and accompanying text; see also Ford Motor Credit Co. v. Harper, 671 F.2d 1117 (8th Cir. 1982); Tom Bush Volkswagen, Inc. v. Kuntz, 429 So. 2d 398 (Fla. Dist. Ct. App. 1983); Johnson v. GMC, Chevrolet Motors Div., 668 P.2d 139 (Kan. 1983); Johannsen v. Minnesota Valley Ford Tractor Co., 304 N.W.2d 654 (Minn. 1981); Pavesi v. Ford Motor Co., 382 A.2d 954 (N.J. Super. Ct. Ch. Div. 1978), overruled on other grounds by Ramirez v. Autosport, 440 A.2d 1345 (N.J. 1982).

244. Restatement of Restitution § 155(1) (1937) states the following:

Where a person is entitled to restitution from another because the other, without tortious conduct, has received a benefit, the measure of recovery for the benefit thus received is the value of what was received, limited, if the recipient was not at fault or was no more at fault than the claimant, to its value in advancing the purposes of the recipient, except as limited by the statement in Subsection (2). Id.

245. Id. § 155 cmt. a. The rule applies when there has been no tortious conduct, when the party receiving the benefit was not substantially more at fault, when neither party was at fault, when the party seeking restitution was at fault and the other party was not, or when both parties were equally at fault. Id.

246. L.L. Fuller & William R. Perdue, Jr., The Reliance Interest in Contract Damages, 46 Yale L.J. 52, 67 (1936).

247. Anderson, supra note 31, at 249, 277.

248. George E. Palmer, The Law of Restitution § 5.1 (1978); see also John D. Calamari & Joseph M. Perillo, The Law of Contracts § 11-22 (3d ed. 1987).

249. Britton v. Turner, 6 N.H. 481 (N.H. 1884). The Britton court had "no hesitation" adopting a rule that a breaching party should be liable for any damages sustained, but not subject to a complete loss, because otherwise the remedy would be "wholly disproportionate to the injury." Id. at 491.

250. Calamari & Perillo, supra note 248, § 11-22; Palmer, supra note 248, § 5.1, at 573-74.

251. Lancellotti v. Thomas, 491 A.2d 117 (Pa. Super. Ct. 1985).

252. Id. at 118-22. The Restatement (Second) of Contracts § 374(1) (1990) provides that:

Subject to the rule stated in Subsection (2), if a party justifiably refuses to perform on the ground that his remaining duties of performance have been discharged by the other party's breach, the party in breach is entitled to restitution for any benefit that he has conferred by way of part performance or reliance in excess of the loss that he has caused by his own breach.Restatement (Second) of Contracts § 374(1) (1990). Comment (a) of this section states in part: "It is often unjust to allow the injured party to retain the entire benefit of the part performance rendered by the party in breach without paying anything in return." Id. at cmt. a.

253. Lancellotti, 491 A.2d at 120 (citing Calamari & Perillo, supra note 248, § 11-26 (2d ed. 1977)).

254. Id. at 121; see also Calamari & Perillo, supra note 248, § 11-22; U.C.C. § 2-718(2) (1995) ("Where the seller justifiably withholds delivery of goods because of the buyer's breach, . . . the buyer is entitled to restitution of any amount by which the sum of his payments exceeds . . . .").

255. Anderson, supra note 31, at 277.

256. See infra notes 259-371 and accompanying text. It should also be noted that the burden of establishing the value of a setoff is clearly on the seller. For example, in Romy v. Picker Int'l Inc., 1992 U.S. Dist. LEXIS 3995, at * 11 (E.D. Pa. Mar. 31, 1992), the jury was instructed that the buyer's damages could be set off by an amount proven by the seller if the buyer were shown to have profited from use of the equipment. There was no setoff, however, to the more than two-million dollar damage award. Id. The court found that this was not reversible error. Id. In Durfee v. Rod Baxter Imports, Inc., 262 N.W.2d 349, 351-52 (Minn. 1977), the buyer's revocation was found to be effective, though the car had been driven 6300 miles during nine months of use. The court acknowledged that several jurisdictions, relying on equitable principles, had allowed a setoff for the seller based on fair and reasonable use of a car. Id. at 353 n.4. However, because the seller had failed to raise the issue, the court did not consider a setoff. Id. In North River Homes, Inc. v. Bosarge, 594 So. 2d 1153, 1163-64 (Miss. 1992), the seller's failure to ensure that an instruction concerning a setoff was given to the jury prevented any allowance for the buyer's continued use.

257. See supra notes 62, 64-65.

258. See infra notes 259-308 and accompanying text.

259. Triad Sys. Corp. v. Alsip, 880 F.2d 247 (10th Cir. 1989) (per curiam).

260. Id. at 248.

261. Id. at 249.

262. See id. at 248.

263. See id. at 248-49.

264. See Triad, 880 F.2d at 248-49.

265. Ford Motor Credit Co. v. Harper, 671 F.2d 1117 (8th Cir. 1982).

266. Id. at 1119-21.

267. Id. at 1121.

268. Id.

269. Harper, 671 F.2d at 1125; see also Pavesi v. Ford Motor Co., 382 A.2d 954 (N.J. Super. Ct. Ch. Div. 1978), overruled on other grounds by Ramirez v. Autosport, 440 A.2d 1345 (N.J. 1982); Jorgensen v. Pressnall, 545 P.2d 1382 (Or. 1976); Staggs v. Herff Motor Co., 390 S.W.2d 245 (Tenn. 1965); Moore v. Howard Pontiac-Am., Inc., 492 S.W.2d 227 (Tenn. Ct. App. 1972); Pedrini v. Mid-City Trailer Depot, Inc., 459 P.2d 76 (Wash. Ct. App. 1969).

270. See Harper, 671 F.2d at 1125.

271. See id.

272. Johnson v. GMC, Chevrolet Motors Div., 668 P.2d 139 (Kan. 1983). See supra part II