KCA Electronics v. Legacy Electronics

Filed 7/26/07 KCA Electronics v. Legacy Electronics CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment of the Superior Court of Orange County, Derek W. Hunt, Judge. Affirmed.

Tom S. Chun for Plaintiff and Appellant.

Pedersen Law & Dispute Resolution Corp., Neil Pedersen and Dan E. Heck for Defendant and Respondent.

* * *

I. Legal Background

and Introduction to this Appeal

In this case we review a judgment in a lawsuit between a commercial seller and a commercial buyer over rejected merchandise. Accordingly, we begin with a quick

review of some relevant UCC provisions:

A provision of the Uniform Commercial Code (UCC), section 2601, (also enacted in California as section 2601 of the Commercial Code[1]), is known as the perfect tender rule. The operative words of the statute allow a buyer to reject the whole of a delivery of goods if the goods fail in any respect to conform to the contract.[2] Courts have noted that the perfect tender rule imposes a very high level of conformity to the contract on sellers, allowing buyers to reject a sellers tender for any trivial defect, whether it be in the quality of the goods, the timing of the performance, or the manner of delivery. (Midwest Mobile Diagnostic Imaging v. Dynamics Corp. (W.D. Mich. 1997) 965 F.Supp. 1003, 1011.)

The perfect tender rule is tempered, however, by another UCC provision, section 2508 which affords sellers a right to cure the nonconformity.[3] (See Midwest Mobile Diagnostic Imaging, supra, 965 F.Supp. at p. 1011 [To avoid injustice, the Code limits the buyers correlative right to cancel the contract under  2-508. . . . Thus,  2-508s right to cure serves to temper the buyers expansive right to reject under a single delivery contract.].)

Also, the perfect tender rule does not apply to installment contracts, an exception which embodies a policy of the law to protect longer-term commercial relationships. (See William H. Lawrence, Appropriate Standards for a Buyers Refusal to Keep Goods Tendered by a Seller (1994) 35 Wm. & Mary L. Rev. 1635, 1654 [Karl Llewellyn suggested that standing relations warrant separate handling from single-occasion deals] (hereinafter Lawrence, Appropriate Standards).)

As one commentator has described the installment contract exception: The policy in installment contracts is to avoid the abrupt termination of a long term contractual relationship merely for technical reasons and to keep the contract going. Where many deliveries are contemplated, minor defects are likely to appear in some installments and it would give the buyer an unreasonable commercial advantage if he could escape from the contract for the trivial deficiencies which inevitably occur. In an installment contract the buyer has sufficient bargaining power vis--vis future shipments to adjust minor defects. (Lawrence, Appropriate Standards, supra, 35 Wm. & Mary L. Rev. at p. 1654, fn. 86.)

The installment exception to the perfect tender rule is found in section 2612 of the UCC.[4] Unlike the perfect tender standard of section 2601, section 2612 embodies a substantial impairment standard; that is, the buyer may cancel only when the nonconformity of one or more installments substantially impairs the value of the whole contract. (Lawrence, Appropriate Standards, supra, 35 Wm. & Mary L. Rev. at p. 1652.[5])

In the present case even the seller recognizes that, at the end of the day, six percent of the parts it shipped were defective, which in the context of parts for computer memory, not only fails to constitute perfect tender, but also represents a substantial impairment of the value of the whole of the shipments. We therefore conclude that under both the perfect tender standard and the substantial impairment standard there was substantial evidence to support the trial courts decision that the seller take nothing by way of its complaint against the buyer. Accordingly, we affirm the judgment that the seller take nothing by way of its suit.

II. The Facts

A. Standard of Review

We should stress at the outset that, while the trial court prepared a statement of decision, the substantial evidence standard of review applies to all express and implied findings of fact made by the court. (See SFPP v. Burlington Northern & Santa Fe Ry. Co. (2004) 121 Cal.App.4th 452, 462 [The substantial evidence standard applies to both express and implied findings of fact made by the superior court in its statement of decision rendered after a nonjury trial.].) A corollary to the substantial evidence standard of review is that the winner at the trial level, here defendant Legacy Electronics (the buyer in the transaction), receives the benefit of all reasonable inferences that may be drawn from substantial evidence in its favor. (E.g., Estate of Carter (2003) 111 Cal.App.4th 1139, 1154 [all reasonable inferences from substantial evidence are also drawn in favor of the judgment].) Also, all conflicts in the evidence must be resolved in its favor. (See Kahn v. Department of Motor Vehicles (1993) 16 Cal.App.4th 159, 168-169 [On appeal, this courts review of the trial courts findings and judgment is governed by the substantial evidence rule. . . . Factual matters and conflicts in the evidence are viewed in the light most favorable to the prevailing party.].)

B. Narrative of Events July 2003

Through July 2004

Defendant Legacy Electronics wanted to market a device for increasing computer memory that involved a need for thumb-nail sized ball grid array (BGA) canopies. The canopies allow the stacking of computer chips in a memory module, thereby practically doubling computer memory. It was a high-profile project and Legacy needed to make sure that it had the product to build.

The name ball grid array refers to a series of tiny dot-like (and relatively soft) solder bumps on the feet of the canopy which are affixed to a computer circuit board. Plaintiff KCA Electronics was to be the manufacturer of the canopies.

There were four purchase orders over the course of a nine-month time span. Here are the dates of the orders and dates of the shipments:

-- July 2003 (for 9,590 units), shipped July 2003;

-- September 2003 (for 9000 units), shipped in two installments, late October 2003 and late December 2003;

-- October 2003 (for 40,000 units[6]), shipped in ten installments, January through mid-March 2004; and

-- March 2004 (for 600 units), shipped April 2004.

All four purchase orders had time-of-the-essence language. (Time is of the essence, any late or short shipments are cause for cancellation by Legacy Electronics, Inc.) The purchase orders also provided that the Shipper warrants all material to be free from defects and to perform to the original manufacturers specifications for fit, form and function. By contrast, invoices with the shipments had 30-day-written-notice-of-return language. (Buyer shall exercise its right of inspection within 30 days of receipt

. . . and all goods shall be deemed accepted as to quality unless the Seller receives a written notice of rejection within such 30 day period.)

The July 2003 batch was returned because of sticky tape residue on the canopies. It was a bad start for the project, because the residue apparently embarrassed a Legacy executive who had flown to Switzerland to do a sales demonstration.

The residue was cleaned and the canopies were re-shipped in August 2003. However, the re-shipped canopies were returned again, in October 2003, for being undersized. The canopies were re-worked and shipped back in installments, completed in February 2004.

The biggest order, for at least 40,000 units in October 2003, was returned in mid-April 2004 for smashed solder balls and exposed copper. KCAs return merchandise authorization form read: Solder balls are smashed, and exposed copper on the edged [sic]. After resort we got 40951 pcs are good to ship back, and 1852 pcs are scrapped. (A KCA representative, Karl Helber, described in the statement of decision as an independent sales rep, would later describe the type of damage to the solder balls this way: Instead of being round and uniform, you can see its flattened out.

Sheared and smeared was how Legacys director of manufacturing would later describe them.

The April 2004 return brought matters to a head. Helber would testify that KCA agreed to take em back one more time and re-sort. KCA re-inspected and the pieces and concluded they were good and returned them.

Matters were at an impasse as of April 30, 2004. KCA had re-inspected and returned the canopies, Legacy wanted to re-send the canopies back to KCA because of the solder-ball problems, while KCA took the position that it had just 100-percent inspected the canopies and it wasnt going to re-inspect them again.

In early June 2004, to resolve the impasse, Legacys director of manufacturing (Greg Allee) and KCAs director of sales (Ace Sterling) met and came to certain agreements concerning yet another re-inspection, to be done by Legacy, with actual costs paid for by KCA. While Legacy did not agree that all the canopies would be tested, it did agree to do AOI (automated optical inspection) of the canopies. Legacy then optically inspected 20,000 pieces, when it discontinued the inspection because the inspection was itself tying up a production line. Trial testimony was that 1200 pieces from the 20,000 were sorted out as being bad. Documentary evidence of the testing showed inspection of two batches of 10,080 each. In the first batch of 10,080, only 26 pieces failed. In the second, 1349 failed.

In its briefing, KCA recognizes that this inspection yielded an average pass rate of 94 percent. That is looking at the glass as half full. From Legacys point of view, the failure rate was six percent. KCA never did reimburse Legacy for the time costs of the inspection.

In July, Legacys new general counsel offered to pay, as an offer of compromise, for the 18,468 pieces that passed at a reduced price of $1.40 each. (The general counsels letter incorrectly asserted that 32,400 pieces had been inspected, when the figure was really 20,160.) The letter ended with the ultimatum that if the compromise was not accepted by July 16, all canopies in Legacys possession would be returned. The offer wasnt accepted by KCA, the canopies were returned, and KCA instituted this litigation in November 2004. After a court trial, judgment was entered for defendant Legacy.

III. The Judgment Must Be Upheld Under

the Perfect Tender Rule

A. No Properly Raised

Ulterior Motive Issue

We may dispense with one issue summarily, as waived -- that is, waived at the trial level: The idea that the trial court erred in precluding evidence of Legacys supposedly actual reason or ulterior motive for the rejection, which was that it just wasnt selling any of its new memory modules. While the trial court did, indeed, grant a motion in limine precluding such evidence, the judge also stated that KCA could ask the court to reconsider the issue after the court heard all of the evidence. Legacy never renewed its motion.[7]

B. The Perfect Tender Rule

Requires Affirmance

This case is simple if the perfect tender rule governs. And the trial court impliedly concluded that the perfect tender rule does govern, because it explicitly found that the pattern of sales by KCA to Legacy was not an installment contract.

Under the perfect tender rule, two facts are dispositive: (1) There is no question that 6 percent of the sample of some 20,000 parts were nonconforming, and (2) by the time the parties had agreed to test the sample of some 20,000 parts, KCA had had the better part of a year to produce conforming 100 percent conforming canopies. That is, KCA never seasonably exercised its right to cure, because, by no less than the third order filled by February 2004, Legacy was still receiving defective canopies on a series of orders which started the previous July.

C. KCA Has Waived Any

Challenge to the Trial Courts Application

of the Perfect Tender Rule

Legacy argues that KCA has waived the right to take issue with the trial courts conclusion about the installment contract issue because KCA has not presented it properly in its opening brief. (See Respondents Brief at p. 40 [Thus, in order for KCA to rely upon Section 2612 on appeal, it needed to first argue and demonstrate in its opening brief why the trial courts decision was error.].) We agree.

Arguments showing trial court error on appeal must appear in separate headings. (See Cal. Rules of Court, rule 8.204)(a)(1)(B); Conservatorship of Hume (2006) 139 Cal.App.4th 393, 395, fn. 2.) The portion of the opening brief devoted to the theory that Legacys rejection was wrongful under the UCC does not have a heading or subheading devoted to establishing that the trial court erred as a matter of law in rejecting installment contract analysis. The subheadings, rather, seem drawn from trial level points and authorities, where evidence is argued, rather than trial court error. Even worse, there is a substantive failure to argue the merits of the installment contract issue.

The closest KCA comes to raising the issue of trial court error as regards the rejection of whether the case involved installment contracts or merely a series of four separate contracts is in the text, where KCA makes the assertion that this case is governed by Section 2612 without any material trying to prove that point (such as showing that there was no substantial evidence by which the trial court could come to the conclusion it did). The issue of the application of the perfect tender rule has therefore been waived.[8]

D. Even If the Substantial Impairment

Standard Were Applied, Affirmance Would

Still Be Required

KCAs argues that there was no substantial impairment of value given the ultimate 94 percent pass rate of the final (20,160 unit) sample. On this point, however, Legacy must prevail given the standard of review under which this court must operate.

There was testimony from Legacys director of manufacturing that every single solder ball is an electrical contact that needs to make connection for the module to work. Missing or sheared solder balls will not make contact, and that would mean the whole module would be basically not functioning and would have to be reworked or repaired. In short, even one defective canopy would mean a computer than didnt work.

It is a reasonable inference that, had Legacy simply processed all the canopies supplied by KCA, the results would have been commercially unacceptable, particularly given the evidence that the canopies were for a new product, and it would be reasonable for the trial court to conclude that even a six percent failure rate would tarnish the new products reputation. It is particularly noteworthy, in that regard, that Legacy discontinued its inspection at 20,000 units because the inspection process itself tied up a production line. That is, the cost of inspection was itself significant, because it showed a need for zero tolerance of defective parts as part of the original contract. The trial court could thus reasonably conclude that the six percent failure rate was a substantial impairment of the value of the whole contract.

E. Burden Re Nonconformity

KCA argues (1) that Legacy had the burden of showing that the canopies were defective as the result of KCAs manufacturing process as distinct from damage in transit or while in the physical possession of Legacy, and (2) that Legacy did not carry that burden. Of course, in reviewing KCAs arguments, we remain mindful of the principles of the standard of review already mentioned: Legacy receives the benefit of any conflicts in the evidence and all reasonable inferences that may be drawn from substantial evidence.

Substantial evidence that the canopy defects came from the manufacturing process can be found in testimony from Legacys director of manufacturing that (a) defective KCA canopies were found in canopies that were shipped in tubes, as distinct from plastic bags; and (b) similar canopies (BGA canopies with solder bumps, including bottom edges like those supplied by KCA) from another company (Hestia) to Legacy have been shipped in bags like the KCA canopies, and was no damage to solder bumps in those canopies.

From this testimony the trier of fact could reasonably conclude that the solder bump problems originated with KCA and did not occur in the shipping process.

F. Timeliness of Rejection

KCA argues first that the 30-day requirement of written notification on its invoices operates to make any rejection by Legacy untimely. It argues second that even if the 30-day requirement in its invoices is not operative, Legacys rejection was still too late because there was no rejection of the entire inventory (even assuming there was a rejection of the inventory, a separate issue with which we deal with below) until the new general counsels letter of July 2004.

1. 30-Day Written Notice

Legacy points out that the trial court found that KCA never put on any evidence that the 30-day written-notice provision was ever expressly dealt with by the parties, so we are left with the bare evidence of the statement on the back of the invoices. Under UCC section 2207, acceptance of an offer must be made expressly conditional on an additional or different term than those in the offer to be operative.[9] The absence of testimony concerning the 30-day notice provision, plus the absence of language in the invoice itself on the issue, shows that KCA did not make the filling of Legacys orders expressly conditional on the 30-day notice provision. Moreover, KCA made no attempt to enforce the 30-day notice provision, so the trial court could reasonably conclude that it waived any rights it had under the provision.

On top of that, it is clear that if KCA had attempted to enforce the 30-day notice provision, it would have been a material alteration of the contract. Under National Controls, Inc. v. Commodore Bus. Machines, Inc. (1985) 163 Cal.App.3d 688, 695, material alteration under section 2207 is defined this way: A new term is material within the meaning of this section if it would result in surprise or hardship if incorporated without express awareness by the other party. (Italics added.)

It would certainly have resulted in surprise here. There was substantial evidence that Legacy did in fact notify KCA never more than five days after it physically received BGA canopies from KCA. The parties also had a course of dealing with each other in which the two companies would communicate with each other both orally and by e-mails. Under such circumstances, the 30-day written notice provision would operate as a kind of surprise gotcha clause in any case where the defect was only made known to KCA by, say, a quick telephone call as distinct from a formal written letter. Moreover, application of the 30-day written notice provision (as distinct from a 30-day-any-kind-of-notice provision) would be contrary to the established course of conduct of the parties, which was for Legacy to notify KCA of some problem with the canopies, and, most of the time, for KCA to issue RMA forms (the acronym for return merchandise authorization) which would be (and was until the relationship broke down in the Spring of 2004) sufficient.

2. Lateness, Independent of

the 30-Day Notice Provision

Independent of the 30-day notice provision, KCA argues that Legacy waited an unreasonable amount of time to reject the whole of the goods covered by the contract. There was, however, substantial evidence on which the trial court could conclude otherwise.

Specifically, earlier shipments had met a series of problems in addition to the sheared or smeared solder balls: Sticky glue, undersizing, and problems with the silkscreen identification that interfered with the production line. While it is true that KCA may have cured those defects, the very fact of a series of defects (reminiscent of a car buyer who buys a lemon) meant that the trial court could conclude it was commercially reasonable for Legacy to forebear on rejecting the whole of the inventory until it encountered the defect (the solder-balls) that simply wasnt going to be cured. The real time frame for rejection, then, was not July 2003 to July 2004, but early May 2004 (when the sample showed a six percent failure rate) to the letter in July 2004 -- barely more than a month.

G. Rejection or Compromise

KCA asserts that language in Legacys new general counsels July 9, 2004 letter must be construed as a rejection of only those canopies that failed inspection, hence an agreement to pay for all canopies that passed inspection. Not so. The letter proposes a compromise whereby Legacy was willing to pay for the roughly 18,000 canopies that its inspection had found to be functional at a reduced price, and if KCA deem[ed] this arrangement unacceptable or if [Legacy] had not heard back in one week, there was the threat to unilaterally return all BGA canopies in our possession. Thats a rejection of the whole, subject only to an offer to compromise that KCA did not accept.

H. Purported Oral Contracts

KCA also argues that Legacy violated two oral agreements in ultimately rejecting all the canopies. Substantial evidence, however, supports the trial courts conclusion that the parties never entered into either of the purported agreements.

1. The Two-Percent Agreement

The first of the purported agreements may be called the two-percent agreement. The two-percent agreement refers to a supposed agreement made at the operating level in April 2004 because the return pattern had repeated itself too often. The idea was that if there was more than 2 percent defective pieces (but not including any problems with silk-screening), Legacy could return them. In its statement of decision, the trial court described the testimony about the two-percent agreement as sketchy, noted that the plan may not have been reported above the operating level and was uncertain in its essential term: Whether the two percent figure was to apply to the failure rate per shipment or for overall failure of the product. The trial courts bottom line on the two-percent agreement was that it had not been proved by a preponderance of the evidence. (Hence we did not include it in our narrative of the facts above.) The trial judge also found that the two-percent agreement, considered as a subject, appears to have been dropped altogether -- replaced in the dispute by KCAs . . . notice of higher prices.

Most of KCAs briefing on the two-percent agreement is devoted to the magnification of a clerical error made by the trial court. The error appears to be one of those inadvertent transpositions that most mortal writers commit from time to time. Specifically, in its statement of decision the trial court reversed the parties on the point as whether the two-percent figure should apply per shipment or overall. The trial court (erroneously) wrote that Legacy personnel apparently believed it was the former, KCA the latter.

He really meant vice versa: As a matter of which side would favor which interpretation, it was Legacy, the buyer, who would naturally prefer a two-percent standard for the whole product, thus allowing easier rejection of the whole, while KCA, the seller, would naturally want a two-percent standard per shipment, thus allowing it to salvage sales based on individual shipments where the failure rate was below two-percent. KCAs main point, though, is that (despite what might have been its natural position) Legacy actually agreed to a two-percent standard on a per shipment basis.

The argument fails because there is substantial evidence that the parties mutually agreed to drop the two-percent plan. Such a plan was simply incompatible with the arrangements for an inspection which the parties contrived in late April. (Even KCA refers, in its brief, to this inspection agreement as superseding the two-percent arrangement, see page 30.)

More specifically, there is substantial evidence that Legacys Greg Allee and KCAs Ace Sterling met and, whatever else they might have agreed to, they certainly agreed that KCA would reimburse Legacy for actual costs of an automated optical inspection of the whole inventory (or at least about 40,000 pieces, as testimony by Karl Helber indicated[10]).

Such an inspection clearly included pieces delivered in prior shipments. But -- any such inspection would be meaningless if, for sake of argument, the two-percent agreement was still in force, because the version of the two-percent agreement as propounded now by KCA would require Legacy to go back and try to calculate a defect rate based on a series of segregated past shipments that arrived in the period August 2003 through April 2004.

The mere fact of the arrangement for a mass inspection, then, is substantial evidence supporting the trial courts finding that the parties really did drop the two-percent agreement, because a mass inspection for defects would have been inherently incompatible with any agreement to go back and retroactively segregate pieces by shipments and then, within shipments, segregate by defective and non-defective parts.

Moreover, given the sketchiness of the terms of the two-percent agreement, it only makes sense to interpret such an agreement prospectively. Helbers testimony that KCA agreed to take em back one more time and re-sort and then return them again to Legacy supports an inference that what the parties had in mind was that individual shipments pursuant to that return would be inspected for defects on a shipment-by-shipment basis in the future.[11] And, as we have just pointed out, what the parties ultimately did agree to was to simply have a mass inspection. To reiterate, the alternative, namely that Legacy agreed to retroactively go back and test pieces by past shipment is highly counterintuitive -- it is clear that Legacy was sending shipments back for defects, not segregating them for future testing -- and KCA does not point to any evidence that Legacy ever undertook such an administratively burdensome task, even if it were possible.

2. The Inspection Agreement

The second purported oral agreement revolves around the inspection which, as we have just noted, the parties certainly did arrange. However, KCA asserts that the inspection agreement entailed more than just an inspection paid for by KCA -- it also meant an agreement to pay for all parts that passed.

The argument fails because there was conflicting evidence in the form of the testimony from Legacys Allee (on cross-examination) that the inspection agreement

was for only an inspection, with any discussions as to payment, including payment for canopies that passed inspection, to be based on a future agreement.[12] Specifically:

Q. And it was agreed, was it not, that based on the test, Legacy would pay for all the boards that it found were good, right?

[Foundation objection made and overruled.]

The witness: Um, thats -- we didnt even establish a price, so thats not -- we werent to that point of the agreement, yet.

Now, to be sure, a few lines down, Allee admitted that the price he was referring to was the cost of testing. However, in context, the testimony is reasonably susceptible of the idea that, simply, there was an agreement to inspect and thats all.

Moreover, Allee testified, clearly, that he had no authority to enter into a contract on behalf of Legacy to purchase any of the canopies that are the subject of this litigation at that time, with the phrase that time referring to the time of the optical test performed by Legacy. While KCA asserts (without elaboration) that Allee had ostensible authority to enter into a purchase agreement, the authority point is significant not because Legacy is trying to disavow an oral contract entered into by Allee as ultra vires, but as support for implied trial court finding that Allee in fact didnt enter into any sort of purchase contract. If Allee and Sterling didnt come to an agreement about the actual cost of testing, it is natural to conclude that they didnt come to an agreement to pay for pieces that passed inspection either. The fact that KCA never did reimburse Legacys time cost (an entire production line was shut-down, which is why the inspection was discontinued at 20,160) supports that conclusion: The inspection agreement was an attempt to break an impasse brought about by KCAs insistence that it had already inspected canopies then in Legacys possession and Legacys insistence that there were still defective canopies.

Finally, there was also clear testimony from Allee that, whatever the quantity of canopies inspected, the mass inspection did not entail the inspection of all the canopies.[13] An agreement to do a mass inspection that did not entail inspection of all canopies also supports that conclusion that any agreement was only to do an inspection: Ironically, KCAs version of the agreement would give Legacy more power than KCA would be expected to want to give Legacy -- Legacy could simply do a small mass inspection and keep its purchases to a minimum based on a low, arbitrary number of canopies that it selected for inspection. Rather, the trial court could reasonably conclude that the agreement to do an inspection was a last-ditch effort by the parties simply to ascertain the defect rate of parts already delivered, and proceed from there.

IV. DISPOSITION

The judgment is affirmed. Respondent is to recover its costs on appeal.

SILLS, P. J.

WE CONCUR:

BEDSWORTH, J.

OLEARY, J.

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Analysis and review provided by Chula Vista Property line Lawyers.

[1] All further references to sections of the UCC will be to the exactly corresponding section of Californias Commercial Code.

[2] Here is the entire text of section 2601:

Subject to the provisions of this division on breach in installment contracts (Section 2612) and unless otherwise agreed under the sections on contractual limitations of remedy (Sections 2718 and 2719), if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may [] (a) Reject the whole; or [] (b) Accept the whole; or [] (c) Accept any commercial unit or units and reject the rest.

[3] Here is the entire text of section 2508:

(1) Where any tender or delivery by the seller is rejected because nonconforming and the time for performance has not yet expired, the seller may seasonably notify the buyer of his intention to cure and may then within the contract time make a conforming delivery. [] (2) Where the buyer rejects a nonconforming tender which the seller had reasonable grounds to believe would be acceptable with or without money allowance the seller may if he seasonally notifies the buyer have a further reasonable time to substitute a conforming tender.

A reporters footnote indicates that the word seasonally in the California Commercial Code is seasonably in the official edition.

[4] Here is the entire text of section 2612:

(1) An installment contract is one which requires or authorizes the delivery of goods in separate lots to be separately accepted, even though the contract contains a clause each delivery is a separate contract or its equivalent. [] (2) The buyer may reject any installment which is nonconforming if the nonconformity substantially impairs the value of that installment and cannot be cured or if the nonconformity is a defect in the required documents; but if the nonconformity does not fall within subdivision (3) and the seller gives adequate assurance of its cure the buyer must accept that installment. [] (3) Whenever nonconformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a breach of the whole. But the aggrieved party reinstates the contract if he accepts a nonconforming installment without seasonably notifying of cancellation or if he brings an action with respect only to past installments or demands performance as to future installments.

[5] Professor Lawrence himself goes on to argue that the substantial impairment standard is not justified even as to installment contracts, because provisions in section 2612 affording a sellers right to cure accommodate the interests of the continuing relationship created by an installment contract. (Lawrence, Appropriate Standards, supra, 35 Wm. & Mary L. Rev. at pp. 1654-1655.)

[6] The two copies in the record seem to indicate 50,000 units, though the appellants brief indicates that the figure is 40,000 units. The 40,000 figure makes more sense with the rest of the record, particularly the number of pieces that Legacy appears to have had for a final inspection at the point when the transaction turned to litigation.

[7] Obviously, some evidence of motive got in: The trial judge noted in the statement of decision that in the interim the market changed as to the size and specifications of memory modules, which left Legacys DDR-1 design an orphan.

[8] Speaking of matters relating to KCAs briefing, Legacys motion to strike portions (specifically, the two tabbed exhibits attached to it) of KCAs reply brief is granted in part and denied in part. It is denied as to the first exhibit. The first exhibit is just a flow chart outlining KCAs legal theory; concomitant with what we have just said about waiver, the chart does not address the issue of whether the trial courts rejection of the installment contract theory was error; it merely assumes that the substantial impairment rule of section 2612 applies. The part that is granted concerns the second exhibit. The second exhibit is made up of pages 148-151 of the deposition of Ace Sterling. The material is hereby stricken from the reply brief because, on February 22, 2007, KCA made a motion to augment the record with those very pages from Sterlings deposition, which this court, in an order filed March 19, 2007, denied.

[9] Section 2207, subdivision (1) provides:

(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

[10] Referring to a discussion after April 30, 2004, and a question as to whether Helber disagreed with Legacy findings at that discussion, Helber said he disagreed with Legacys findings that after 100-percent inspection of some 40,000, or almost 5,000 [sic: probably a reporters typo since 50,000 was closer to the total inventory of parts and there is no 5,000 figure in the post-April 30 inspection] parts, that they were still finding -- they were still complaining about the same defect.

[11] Helbers testimony is exactly clear as to what was agreed to when. This is another time when the standard of review means that Legacy gets the benefit of the doubt.

[12] In its respondents brief Legacy adduces as part of that conflicting evidence Sterlings own testimony that a requirement that Legacy take only part of the lot that passed was not a special term that you guys negotiated between the two of you.

[13] Q. An element of that agreement was that Legacy would perform an A.O.I. testing on all the canopies, right?

A. That wasnt the agreement.

Q. Well, was that part of the agreement?

A. No. Youre saying, all the canopies. That wasnt the agreement.