Michigan Sugar Company instituted an action to collect several outstanding invoices for sugar that it supplied Jebavy-Sorenson Orchard Company. Jebavy-Sorenson filed a counterclaim claiming a breach of an implied warranty. MCLA 440.2314; MSA 19.2314, MCLA 440.2315; MSA 19.2315. A partial summary judgment was granted Michigan Sugar as to its claim and the matter proceeded to trial on Jebavy-Soren-son’s counterclaim. Following a bench trial the trial court granted Jеbavy-Sorenson a judgment on its counterclaim. It is from this judgment that Michigan Sugar appeals as of right.
In its counterclaim Jebavy-Sorenson alleged that Michigan Sugar furnished it with defective sugar on two occasions in November, 1969. At the time Jebavy-Sorenson was processing frozen diced apples in accordance with a contract it had with the *644 Joseph Campbell Co. Of the 800 bags that Michigan Sugar furnished in the two shipments, Jebavy-Sorenson returned 68 bags to Michigan Sugar because there was excessive "pan scale” in the bags. These 68 bags were replaced by Michigan Sugar. The balance of the shipments, including the exchanged 68 bags, were used to pack the apples for Campbell’s. Jebavy-Sorenson’s inspectors noticed some "pan scale” in the remaining 732 bags but Jebavy-Sorenson used these bags anyway.
After Jebavy-Sorenson had cоmpleted packing the apples for Campbell’s they were stored in cold storage and Jebavy-Sorenson was paid by Campbell’s on the issuance of a warehouse receipt. In the spring of 1971 Campbell began using these frozen apples. Because of their extremely high standards, much higher than the industry standards, Campbell’s rejected many pallets of frozen apples. It rejected a pallet when its inspectors found specks of what later proved to be "pan scale” in one of 64 tins on the pallet. After rejecting the frozen apples Campbell’s billed back Je-bavy-Sorenson. During the course of the next three years Jebavy-Sorenson sold these frozen apples at a great loss.
Since the trial court was sitting as the finder of fact we only review the trial court’s judgment to determine if it was clearly erroneous. GCR 1963, 517.1.
Goodwin, Inc v Orson E Coe Pontiac, Inc,
Having determined that Michigan Sugar had breached its implied warranty of merchantability, the trial court proceeded to determine the damages caused by the breach of warranty. Based on its findings of fact, thе trial court found that Jebavy-Sorenson’s losses on the Campbell’s contract were foreseeable. MCLA 440.2715(2); MSA 19.2715(2). In order to make Jebavy-Sorеnson whole the trial court assessed damages in an amount equal to Jebavy-Sorenson’s losses on the Campbell’s contract.
Ambassador Steel Co v Ewald Steel Co,
The testimоny of Richard Brye, Jr., Jebavy-Sor-enson’s vice-president and general manager, though, clearly indicates that he knew that there was some "рan scale” in some of the 732 bags that were not returned to Michigan Sugar. The testimony of George Gilbert, then the United States Department of Agriсulture inspector assigned to the Jebavy-Sorenson plant, corroborates Brye’s testimony. 1 The requirements of the Campbell’s contract were within the special knowledge of Brye and he knew or should have known that Campbell’s would reject the frozen apples if they contained any foreign matter, which all parties agree "pan scale” is.
Such an inspection by the buyer does not create an exclusion of the implied warranty of merchantability. MCLA 440.2316(3)(b); MSA 19.2316(3)(b). *646 To make this section applicable, the inspection by the buyer must occur before thе buyer’s acceptance. MCLA 440.2316(3)(b); MSA 19.2316(3)(b), Official Comment 8. The fact that Michigan Sugar accepted the return of 68 bags of defective sugar is not sufficient evidence that Jebavy-Sorenson had not accepted the sugar prior to inspection. In addition there was insufficient evidence to support an exclusion of the implied warranty under MCLA 440.2316(3)(c); MSA 19.2316(3)(c).
The knowledge of the "pan scale” gained through the inspection of the sugar that was used, however, does prevent Jebavy-Sorenson from recovering the lost profits as a consequential damage. MCLA 440.2715(2)(а); MSA 19.2715(2)(a), accord
American Glue Co v Rayburn,
*647
Under the Uniform Commercial Code as adopted in Michigan once tender has been accepted "the buyer must within a reasonable time after he discovers * * * any breach, notify the seller of breach or be barred from any remedy”. MCLA 440.2607(3)(a); MSA 19.2607(3)(a). The "pan scalе” was discovered in November, 1969, but Michigan Sugar was not notified that any of the sugar used had "pan scale” in it until May, 1971. In view of the fact that Jebavy-Sorеnson used the sugar promptly, the notification was not within a commercially reasonable time. MCLA 440.2607; MSA 19.2607, Official Comment 4,
Jones v Linebaugh,
While Jebavy-Sorenson did notify Miсhigan Sugar that 68 of the bags were defective it gave no notice of any other defective bags. Although the notice of a breach of warranty must only inform the seller that there are outstanding problems with the transaction, we do not believe that the notice given by Jebavy-Sorеnson in November, 1969, was sufficient. MCLA 440.2607; MSA 19.2607, Official Comment 4,
General Instrument Corp v Pennsylvania Pressed Metals, Inc,
*648 The trial court’s finding of fact as to when Jebavy-Sorenson learned of the "pan scale” in the sugar that it used in filling the Campbell’s сontract was clearly erroneous. Because of this erroneous finding of fact, the trial court failed to apply the correсt sections of the Uniform Commercial Code to the facts. After applying the correct sections of the code, we conclude that Michigan Sugar was entitled to a judgment of no cause of action on Jebavy-Sorenson’s counterclaim as a matter of law.
Reversed and remanded for entry of judgment in accordance with this opinion. Costs to appellant.
Notes
At the time of trial Gilbert was employed by Jebavy-Sorenson.