Question

2. Risk of Loss.

Facts: Harold Shook agreed with Graybar Electric Co. to purchase three reels of burial cable for use in Shook’s construction work. When the reels were delivered, each carton was marked “burial cable,” although two of the reels were in fact aerial ca­ble. Shook accepted the conforming reel of cable and notified Graybar that he was reject­ing the two reels of aerial cable. Because of a trucker’s strike, Shook was unsuccessful in ar­ranging for the return of the reels to Graybar. He stored the reels in a well-lighted space near a grocery store owner’s dwelling, which was close to his work site. About four months later, he noticed that one of the reels had been stolen. On the following day he no­tified Graybar of the loss and, worried about the safety of the second reel, arranged to have it transported to a garage for storage. Before the second reel could be transferred, however, it was also stolen, and Shook notified Graybar of the second theft. Graybar sued Shook for the purchase price, claiming that Shook had agreed to return to Graybar the nonconforming reels and had failed to do so. Shook contended that he had agreed only to contact a trucking company to return the reels and that, because he had con­tacted three trucking firms to no avail (owing to the strike), his obligation had been ful­filled.

ISSUE: Discuss who bears the risk of loss for the stolen reels.

RESOLUTION: [Graybar Electric Company v. Shook, 195 S.E.2d 514 (NC, 1973)] How did the court answer the questions? What did the court decide?

EXPLANATION-Do you agree with the court? Why or why not? Can you change any facts to give a different result?

Answer 1

Plaintiff: GRAYBAR ELECTRIC COMPANY

Defendant: HAROLD E. SHOOK, TRADING AND DOING BUSINESS AS MID-SOUTH CONTRACTING COMPANY

Discuss who bears the risk of loss for the stolen reels.: Based on the facts of the case and taking into consideration G.S. § 25-2-602(2) *517 (b) (Uniform Commercial Code), the risk of loss for the stolen reels lie with the seller (GRAYBAR ELECTRIC COMPANY) of the reels.

How did the court answer the questions? –The plaintiff made an error of delivering nonconforming goods and as a result was entitled to notice of the nonconformity sufficient to enable it to repossess the nonconforming goods. The plaintiff was given prompt notice of the nonconformity but the plaintiff did not take any action for three months and the non-conforming cables were stolen from the defendant's regular storage space where the plaintiff had delivered it. The Court stated that there isn’t sufficient evidence to prove that a safer storage space was available.

Further, the plaintiff, has failed to establish a contract on the part of the defendant to return the shipment, however, contended that as per G.S. § 25-2-602(2) *517 (b) (Uniform Commercial Code) the defendant was to exercise reasonable care in holding the rejected goods pending the plaintiff's repossession and removal and that the defendant failed to exercise the required care in storage.

The Uniform Commercial Code emphasizes promptness and good faith. The prospective purchaser may exercise a valid right to reject and even if he takes possession, responsibility expires after a reasonable time in which the owner has opportunity to repossess. "Where a tender or delivery of goods so fails to conform to the contract as to give a right of rejection the risk of their loss remains on the seller until cure or acceptance." G.S. § 25-2-510(1). The defendant did not accept the aerial cable. According to the evidence and the court's findings, the defendant acted in accordance with the request of the owner in attempting to facilitate the return of that which the defendant rejected. The plaintiff with full notice of the place of storage which was at the place of delivery did nothing but sleep on its rights for more than three months.

What did the court decide? – The Court decided that the defendant had given adequate notice to the plaintiff on the non-conforming reels and had also taken sufficient and reasonable care in storing the non-conforming reels. In fact, the defendant took good faith measures in approaching trucking companies to transport the cables back to the plaintiff. On the other hand, the plaintiff having been informed about the delivery of non-conforming goods did not act but slept on its rights and therefore would not be provided with any recourse for the stolen reels.

Do you agree with the court? – Yes, I agree with court’s decision.

Why or why not? – I agree because the defendant acted in good faith and took all necessary measures to return the non-conforming goods, whereas, the plaintiff though fully informed failed to take any action. This brings us to the latin phrase – “vigilantibus Et Non Dormientibus Jura Subveniunt” which means ‘the law assists those that are vigilant with their rights, and not those that sleep thereupon’.

Can you change any facts to give a different result? – This is a very hypothetical question and many-a-things could be changed to give a different result. I would take my chances in saying that, if the defendant accepted the delivery and did not inform the plaintiff of the non-conforming goods, the plaintiff would have been entitled to claim damages from the defendant for loss of goods. The reason being, the defendant would not have been able to take shelter under G.S. § 25-2-510(1).