How Long Can a Buyer Return Defective Coins?

What if a collector buys a bag of uncirculated Franklin halves and opens it a year later to discover it to contain only AUs or worse? Or a dealer receives such a complaint from a customer (and physical return of the coins) more than a year after delivery? Do transactions become final if neither party complains within a certain period of time?

As always, the answer may depend upon other circumstances. In some cases, the seller’s invoice (or buyer’s purchase order) may contain a term specifically limiting the amount of time the buyer has to object to the delivery. Such clauses generally either give the buyer an unconditional return or exchange privilege for seven, fourteen or even thirty days, or provide that buyers must inspect their purchases and raise any discrepancies with the seller within a certain period of time or be deemed to have accepted the coins. Many dealers allow much longer return periods for coins that aren’t genuine.

In the absence of any specific contractual provisions addressing the point, buyers’ rights of rejection are governed by the Uniform Commercial Code as enacted in the relevant state. The analysis starts with UCC section 2-602, which states that a buyer can reject goods "within a reasonable time after delivery" and that rejections are effective only if the buyer "seasonably notifies the seller." Section 2-602 goes on to say that a rejecting buyer can’t "exercise ownership" over the goods and must reasonably care for them until the seller reclaims them. (I’ve always felt this means a buyer can’t hedge his or her bets by offering coins for sale while at the same time trying to get a refund from his or her supplier.)

If a buyer fails to reject the goods in accordance with section 2-602, then UCC section 2-606 states that the goods will be deemed to have been accepted, but with two important exceptions. First, if the buyer had no "reasonable opportunity to inspect the goods," then any time period for rejection does not start to run. This would apply where, for example, coins have been stored with a dealer or at a depository and the buyer hadn’t inspected them. Second, under UCC section 2-608 a buyer who has previously accepted goods may revoke that acceptance if it was based upon either (1) the difficulty of discovering nonconformities immediately after delivery or (2) the seller’s "assurances" that the goods conformed with the contract requirements. Such situations might occur where the problem is one not easily recognized, such as incorrect identification of a pattern coin or fake provenance. But this right to revoke acceptance must be exercised "within a reasonable time after the buyer discovers or should have discovered the ground for it" and must be communicated to the seller.

The UCC’s frequent use of the words "seasonable" and "reasonable" in these provisions allows courts to view situations as a whole and determine whether under the given facts a buyer is bound to acceptance of goods. For example, in one California case involving the sale of television sets, the court held that disputes over payment terms did not constitute a rejection where the buyer never indicated that it didn’t want the televisions. In another case involving steel coils, the court found that a revocation of acceptance made five months after delivery was reasonable because, until the buyer’s customer complained about the quality of the steel and a chemical test was performed, the buyer could not have discovered the defect (revocation was made within nine days after the buyer received the test results.)

In the case of a "wrongful rejection," UCC section 2-703 entitles the seller to a choice of remedies, including suing for the price, reselling the goods and suing for the difference between the sales proceeds and the amount due under the original contract, and for any other "incidental" damages caused by the breach.

So while there are no actual time periods in the UCC, it seems clear that unless the buyer in my Franklin half scenario was unable to inspect the coins (so the seller couldn’t argue that any discrepancies "should have been discovered"), the alleged differences in the coins would not be considered latent and the buyer would have accepted the goods well before the one year period had passed. The seller would have the right to hold any returned goods for the buyer or ship them back to the buyer with an invoice for the shipping costs.