## Facts

- GNP Commodities, Inc. (GNP) was a commodities trader, a Chicago Mercantile Exchange (CME) member, and a hedger/speculator in frozen pork bellies; it bought “cash” pork bellies and sold futures contracts to hedge, keeping the option to deliver the cash product against a futures position if needed.
- CME delivery rules made the pork bellies’ freeze dates highly significant to GNP: for delivery against certain futures contracts, bellies had to be frozen no earlier than the preceding November 1; older bellies carried a greater risk of deterioration and were not acceptable for delivery.
- On March 27, 1974, GNP’s president, Myron Rosenthal, spoke with Eugene Figurelli, an agent of Walsh Heffernan Company (Walsh), a public meat broker acting as agent for the seller, Florence Beef Company (Florence).
- Figurelli offered frozen pork bellies. Rosenthal indicated GNP’s interest depended on specifications including freeze date, price, manufacture, and location.
- Figurelli represented that the bellies had been frozen within the last 15 days and later stated the freeze dates were February 1, 1974, or later; he also assured Rosenthal the bellies met CME requirements for delivery.
- GNP agreed to purchase ten loads. GNP paid \$164,368.39.
- Walsh’s written confirmation listed information such as storage locations and weight but did not state the freeze dates.
- Figurelli continued to reassure Rosenthal after the sale that the freeze dates were February 1, 1974, or later. Rosenthal testified he trusted Figurelli’s statements based on prior dealings.
- In June 1974, at Rosenthal’s request, the CME inspected the loads. The inspection failed because the bellies were found to have been frozen before November 1, 1973.
- It was ultimately determined that nine of the ten loads were frozen before November 1, 1973, making them non-deliverable and therefore worthless to GNP for its hedging purpose.
- GNP sought to undo the transaction and return the bellies, but Walsh refused to accept them back or cancel the deal.
- GNP sued Walsh and Florence. A jury returned a verdict for GNP, finding that the defendants, singly or together, knowingly misrepresented the age of the pork bellies.
- Walsh and Florence appealed, arguing (among other things) that GNP did not reject or revoke acceptance within a reasonable time and challenging the jury-demand and damages rulings.

## Issues

1. Did the trial court err by permitting GNP to file a jury demand after the defendants withdrew their prior jury demand before retrial?
2. Did GNP reject the goods or revoke acceptance within a reasonable time under the U.C.C. after learning the freeze dates made the goods nonconforming for CME delivery?
3. Did the freeze-date nonconformity substantially impair the value of the pork bellies to GNP so as to support revocation of acceptance under U.C.C. § 2-608?
4. Did the trial court commit reversible error by instructing the jury that damages were limited to return of the purchase price?

## Decision

- The Appellate Court of Illinois affirmed the judgment for GNP.
- The trial court acted within its discretion in allowing GNP to demand a jury after the defendants withdrew their jury demand before retrial.
- The court upheld the jury’s determination that GNP’s rejection or revocation occurred within a reasonable time given the nature of the nonconformity, the buyer’s reliance on repeated representations about freeze dates, and the later discovery through CME inspection.
- The court agreed that the nonconformity substantially impaired the value of the goods to GNP because the bellies could not be delivered against futures contracts under CME rules, defeating GNP’s identified purpose for buying them.
- The court found no reversible error in the damages instruction in the context of the relief awarded following revocation, which effectively returned the purchase price to GNP.

## Legal Principles

- Under U.C.C. § 2-608, a buyer may revoke acceptance of goods whose nonconformity substantially impairs their value to the buyer, and the inquiry focuses on the buyer’s use and the commercial setting, not only on general market value.
- “Reasonable time” for rejection or revocation under the U.C.C. depends on the circumstances, including whether the defect is readily discoverable and whether the seller or its agent made statements that could delay discovery.
- Where the seller (or broker acting for the seller) represents that goods meet a compliance-related requirement material to the buyer’s intended use, the buyer’s reliance may support findings on both substantial impairment and the timeliness of revocation once the truth is learned.
- Upon revocation, the buyer may obtain a remedy aimed at restoring the parties to the position they would have occupied absent the nonconforming tender, which can include recovery of the price paid when the transaction’s value to the buyer has been defeated.

## Conclusion

The court affirmed a verdict for GNP after finding that misrepresentations about pork belly freeze dates resulted in nonconforming goods that could not be delivered under CME rules, substantially impairing their value to GNP as a hedger, and that GNP acted within a reasonable time to reject or revoke acceptance after the nonconformity was confirmed by CME inspection.


GNP Commodities, Inc. v. Walsh Heffernan Co., 420 N.E.2d 659 (1981)