## Facts

- Frank Campbell, an Iowa farmer, contracted to sell AG Finder Iowa Nebraska (a trade name for Management Consultants, Inc.) his 1997 crop of organic soybeans at $14.50 per bushel, F.O.B. farm.
- The contract required “human food quality” soybeans with moisture below 13.5% and required Campbell to provide samples for approval testing before shipment.
- AG Finder had arranged to resell the soybeans to an international buyer for European food production, where GMO contamination was a key concern.
- Campbell provided samples; testing showed moisture above the contractual limit, but AG Finder nonetheless directed shipment to a mill for cleaning/processing and proceeded with the logistics.
- Samples taken in connection with grading were sent for GMO testing; the soybeans were shipped onward before GMO test results returned.
- After the GMO test reported more than 0.1% GMO content, the European buyer rejected the soybeans; the soybeans were returned to Iowa.
- AG Finder then resold the soybeans for animal feed at a lower value and deducted multiple expenses (including advances and freight-related charges), reducing the amount paid to Campbell.
- Campbell sued for the unpaid balance of the contract price (net of appropriate offsets); AG Finder asserted it validly revoked acceptance due to nonconformity and counterclaimed for damages.

## Issues

1. Whether AG Finder could revoke acceptance under Iowa Code § 554.2608 (UCC § 2-608) based on nonconformity (moisture and GMO content) after accepting and directing shipment of the soybeans.
2. Whether AG Finder’s conduct constituted acceptance that limited it to damages for nonconformity rather than revocation and avoidance of the price obligation.
3. Whether the trial court properly awarded Campbell the unpaid contract balance and properly handled AG Finder’s claimed offsets and counterclaims.

## Decision

- The Iowa Court of Appeals affirmed the district court’s judgment for Campbell after a bench trial.
- The court agreed the soybeans were nonconforming (not “human food quality” and some exceeded the moisture specification) but held AG Finder did not meet statutory requirements to revoke acceptance.
- The court upheld the trial court’s award of the contract balance due to Campbell, reduced by the offsets the trial court allowed, and rejected AG Finder’s counterclaims.

## Legal Principles

- Under the UCC, a buyer who accepts nonconforming goods generally may seek damages for nonconformity, but revocation of acceptance is available only under the limited conditions in Iowa Code § 554.2608.
- Revocation requires a nonconformity that substantially impairs value and acceptance induced by either (a) a reasonable assumption of cure not seasonably cured, or (b) difficulty of discovery or seller assurances; revocation must be within a reasonable time and before substantial change in the goods not caused by their defects.
- A buyer that proceeds with shipment and processing despite known nonconformity, or that controls inspection and shipment timing yet proceeds before receiving test results, may be barred from revoking acceptance and may instead be limited to provable damages.
- Substantial changes in condition or location of goods (e.g., processing and international shipment) can defeat revocation when asserted only after downstream rejection.

## Conclusion

The court held that although the soybeans did not conform to contract specifications, AG Finder accepted them and failed to satisfy the statutory prerequisites for revocation of acceptance; Campbell therefore recovered the unpaid contract balance subject to the offsets the trial court permitted, and AG Finder’s counterclaims failed.


Campbell v. AG Finder Iowa Neb., No. 03-0323, 2004 WL 893937 (Iowa Ct. App. Mar. 24, 2004)