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Sunday, January 22, 2006

Revoking Acceptance of that Lemon RV for Nonconformity

Nevada_state_sealIn a recent case, the Nevada Supreme Court held that, pursuant to UCC 2-608, the buyers of an RV could revoke acceptance for nonconformity – the RV’s engine had a history of overheating.

Shortly after taking possession of the RV, the purchasers took a trip from Las Vegas to Hemet, California. On the way back, the entry door popped open and the RV’s engine overheated while ascending a moderate hill. The buyers had to pull over on the side of the road and wait for the engine to cool down. This was only the beginning of the buyers’ problems with the RV, which continually overheated. The service department of the RV dealer spent a lot of time attempting to repair the RV.

The buyers sued the dealership for equitable and monetary relief. The dealership, in turn, sued the RV manufacturer. After a bench trial, the court concluded that the RV’s nonconformities substantially impaired its value to the buyers. The trial court allowed the buyers to revoke their acceptance of the RV and ordered the dealership to return all of the buyers’ out-of-pocket expenses. (The court further concluded that the dealership was not entitled to indemnification from the manufacturer).

On appeal, the dealership argued that the trial court erred in allowing the buyers to revoke their acceptance of the RV because the buyers did not prove that the RV suffered nonconformities that substantially impaired its value. The Supreme Court of Nevada disagreed with the dealership, and affirmed the trial court determination.

The Nevada Supreme Court explained:

The district court found that despite [the dealership’s] good-faith attempts to repair the RV, the nonconformities persisted and rendered the RV unfit for its intended use. Some of those nonconformities identified by the district court included: the bedroom air conditioning does not cool, the front air conditioning does not cool, the dash heater does not blow hot air, RV batteries do not stay charged, and chronic engine overheating. The district court concluded that these nonconformities and others substantially impaired the RV's value to the [buyers] and that the [buyers] had revoked their acceptance of the RV within a reasonable time.

The Nevada Supreme Court held that the RV’s infirmities were a substantial impairment of its value under NRS 104.2608 (Nevada’s verbatim enactment of UCC 2-608).  The Nevada court adopted a two-part test established by the Supreme Court of Oregon:

The Supreme Court of Oregon has established a two-part test to determine whether a nonconformity, under the totality of the circumstances, substantially impairs the value of the goods to the buyer. The test has both an objective and a subjective prong:

Since [the statute] provides that the buyer may revoke acceptance of goods "whose nonconformity substantially impairs its value to him," the value of conforming goods to the plaintiff must first be determined. This is a subjective question in the sense that it calls for a consideration of the needs and circumstances of the plaintiff who seeks to revoke; not the needs and circumstances of an average buyer. The second inquiry is whether the nonconformity in fact substantially impairs the value of the goods to the buyer, having in mind his particular needs. This is an objective question in the sense that it calls for evidence of something more than plaintiff's assertion that the nonconformity impaired the value to him; it requires evidence from which it can be inferred that plaintiff's needs were not met because of the nonconformity.

As for subjective value, the buyers testified that they purchased the RV “to enjoy the RV lifestyle.” They even testified that they intended to sell their house and spend two to three years traveling around the country. Thus, the court held that the RV’s subjective value to the buyers was based on their ability to enjoy this lifestyle, which was substantially impaired by the RV’s nonconformities.

As for objective impairment, the buyers testified that the RV spent a total of 213 days, or seven months and one day, at the dealership’s service department during the eighteen months immediately following the purchase. Thus, the court held that, the buyers’ testimony was “sufficient to demonstrate an objective, substantial impairment of value.” The court noted that the “chronic engine overheating shook the [buyers’] faith in the RV and undermined their confidence in the RV’s reliability and integrity. Not only did this problem make travel in the RV unreliable and stressful to the [buyers], the overheating made travel in the vehicle objectively unsafe."

Finally, the Nevada court held that the buyers had notified the dealership of their intent to revoke within a reasonable time after purchasing the RV. The court noted that “the seller's attempts to cure do not count against the buyer regarding timely revocation.” Rather, the seller’s attempts to repair toll the reasonable time for the buyer’s revocation of acceptance.

Waddell v. R.V., Inc., 122 Nev. Adv. Op. No. 3 (Nev. Jan. 16, 2006).

[Meredith R. Miller]

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