## Facts

- A retailer (Dewey) planned a seasonal “Toyland” promotion and visited a wholesaler’s showroom (Hays) to select toys, emphasizing plush (stuffed) animals.
- The parties contemplated a total order of approximately $2,500 to $3,500, consisting of some items selected at the showroom and additional toys to be selected by Hays’s employee.
- Multiple shipments arrived during October and November, but less than half of the stuffed animals Dewey expected were delivered; the delivered plush animals were found to have a total purchase price not exceeding $500.
- Dewey repeatedly complained about missing plush animals and was told they were “back ordered” and would be shipped later.
- Near December 1, Dewey told the salesperson he wanted no more toys; a later shipment nonetheless arrived and Hays stated it could be returned unopened.
- Dewey retained the late shipment and other unopened boxes for months, later attempting to return a large quantity of toys; Hays refused the return and shipped the goods back.
- Hays sued for the unpaid price of goods delivered; the trial court entered judgment for Hays for the contract price, subject to limited offsets, finding no material breach and no justified rejection or cancellation.

## Issues

1. Whether the shortfall in stuffed animals constituted a material breach or “substantial impairment” of the value of the whole contract permitting cancellation or refusal to pay for all goods.
2. Whether Dewey made a timely and effective rejection or revocation of acceptance, given his retention, display, and delayed attempted return of the goods.

## Decision

- The Washington Supreme Court affirmed the judgment for Hays.
- The court held that the shortage of stuffed animals did not substantially impair the value of the contract as a whole, given the limited dollar amount involved relative to the total order.
- The court held Dewey’s conduct was inconsistent with rejection and amounted to acceptance, barring an after-the-fact return of most goods months later.
- Dewey remained liable for the price of conforming goods retained and used, with only limited allowance for the missing/nonconforming portion reflected in the trial court’s offsets.

## Legal Principles

- A buyer may cancel or revoke acceptance as to the whole contract only if a nonconformity substantially impairs the value of the entire contract; dissatisfaction alone is insufficient.
- “Substantial impairment” is assessed objectively, including the economic significance of the nonconformity in relation to the overall bargain.
- Retaining, using, or offering goods for sale after a reasonable opportunity to inspect is conduct constituting acceptance, which limits the buyer’s remedies to damages or price adjustment rather than rescission.
- Delayed, large-scale return attempts after acceptance are ineffective as rejection or revocation where the buyer’s conduct is inconsistent with ownership being rejected.

## Conclusion

Because the missing plush animals represented a relatively small portion of the overall order and Dewey kept and used the delivered goods without timely rejection, the buyer could not treat the contract as terminated or return most of the merchandise; the seller was entitled to the contract price subject to limited offsets.


Hays Merchandise, Inc. v. Dewey, 474 P.2d 270 (Wash. 1970)