## Facts

- J.R. Cousin Industries, Inc. (seller/importer) agreed to sell Menard, Inc. (retailer) over 20,000 low-cost bathroom sinks and toilets made in Mexico and shipped directly to Menard’s stores.
- The agreement required Cousin to credit Menard for any returned items, whether defective or not.
- For defective and other returns, Cousin could either require return shipment at its expense or allow Menard to destroy the items; Cousin elected destruction.
- After shipments began (Dec. 1994), Menard deducted amounts from Cousin’s invoices for customer returns that Cousin considered unusually high, asserting many items were defective.
- In June 1995, Cousin requested to inspect the allegedly defective returns at Menard’s premises; Menard stated it had already destroyed more than $15,000 worth of goods as defective.
- Menard permitted inspection of only a small number of undestroyed returns, refused further inspection, and destroyed the remainder.
- Menard ultimately deducted about $72,000 from Cousin’s invoices for returns.
- Cousin alleged Menard’s refusal and destruction violated U.C.C. § 2-515(a) (Wis. Stat. § 402.515(1)), impairing Cousin’s ability to verify defectiveness and whether the returns were the contracted goods.

## Issues

1. Whether U.C.C. § 2-515(a) applied to give Cousin a right, on reasonable notice, to inspect and test returned goods in Menard’s possession, and whether Cousin waived that right by electing destruction.
2. Whether Menard’s refusal to permit meaningful inspection and destruction of the goods allowed an adverse inference against Menard regarding defectiveness and the legitimacy/amount of its charge-backs.
3. Whether the jury’s verdict for Cousin and damages award were supported by the evidence and free of reversible error.

## Decision

- The Seventh Circuit affirmed the judgment for Cousin.
- U.C.C. § 2-515(a) provided Cousin a right to inspect goods in Menard’s possession to ascertain facts and preserve evidence, and it applied to the dispute over returns and defect claims.
- Cousin did not waive the statutory inspection right merely by choosing the contract option that allowed destruction of returns.
- Menard’s conduct—limiting inspection after request and destroying goods—permitted the jury to draw adverse inferences about Menard’s claimed defectiveness and deductions.
- The jury’s approximately $70,000 award was supported by the evidence and permissible inferences.

## Legal Principles

- U.C.C. § 2-515(a) (as enacted in Wisconsin) allows either party, on reasonable notice, to inspect, test, and sample goods in the other party’s possession to ascertain facts and preserve evidence.
- When a party refuses reasonable inspection after request and then destroys the goods, the factfinder may infer the destroyed evidence would have been unfavorable to that party on contested issues such as defectiveness and entitlement to offsets.
- A contractual provision allowing destruction of returned goods does not, without clear language, waive the statutory inspection right aimed at preserving evidence for disputes.

## Conclusion

The court upheld a jury verdict for the seller where the buyer asserted large charge-backs for returns but, after an inspection request, restricted access to the goods and destroyed them; U.C.C. § 2-515(a) supported an adverse inference and the seller’s recovery.


J.R. Cousin Indus., Inc. v. Menard, Inc., 127 F.3d 580 (7th Cir. 1997)