Full opinion text
Opinion KEETON, District Judge. This action was tried before the court without a jury. Findings of fact are stated in parts II-V of this opinion. Conclusions of law and evaluative findings of mixed fact and law are stated in parts VI — XI. Undisputed background facts and the contentions of the parties are summarized in part I. I. Nature of the Case Plaintiff, United California Bank (“UCB”), is a California banking corporation organized under the laws of California, having its principal place of business in Los Angeles. Defendant Eastern Mountain Sports, Inc. (“EMS”) is a corporation organized and existing under the laws of Massachusetts, with its corporate headquarters in Peterborough, New Hampshire. This court has jurisdiction of this action because of diversity of citizenship. At all times material to this lawsuit, UCB has been engaged in the business of general banking. EMS is, and at all times relevant to this action has been, in the business of retail sales of garments, equipment, and other accessories used in camping, hiking, skiing, mountaineering, and other sports. UCB sues as assignee of accounts receivable of Snow Lion Corporation (“Snow Lion”), a winter-clothing manufacturer located in California, to recover from EMS amounts allegedly owing to Snow Lion for goods sold by Snow Lion to EMS. Near the close of trial the parties agreed that the amount EMS owes UCB on the unpaid invoices from the EMS-Snow Lion account is $265,-979.77. UCB claims 18% interest on this amount. EMS asserts three offsets to UCB’s claim. First, EMS contends that certain goods labeled as “down” sold to EMS by Snow Lion were defective, causing EMS lost profits and consequential damages allowable under Mass.Gen. Laws Ann. ch. 106 [UCC], §§ 2-714 and 2-715. Second, EMS argues that two different sets of advertising credits were agreed upon by Snow Lion but never issued to EMS. Third, EMS states that certain goods filled with synthetic fibers purchased from Snow Lion were defective and were delivered late, causing EMS additional losses. EMS asserts that each of its claims for offsets accrued before UCB notified EMS of the assignment and that therefore, under Mass.Gen. Laws Ann. ch. 106 [UCC], § 9 — 318(l)(b), these offsets to claims of Snow Lion are valid against UCB as assignee of Snow Lion. EMS argues in the alternative that, because its claims arise from the terms of the contract between EMS and Snow Lion, they may be asserted under Mass.Gen. Laws Ann. ch. 106 [UCC], § 9-318(l)(a) as offsets against UCB’s claim. In support of this argument, EMS contends that the course of dealing between the parties was to treat the EMS-Snow Lion account as a single contract, or “running account,” allowing EMS tó offset credits issued by Snow Lion against any outstanding invoices, whether or not those credits and invoices related to similar transactions. The amount of offsetting damages and credits claimed by EMS is $275,327.41. UCB responds to the claimed offsets in three ways. First, UCB contends that in November of 1977 Snow Lion, and EMS reached an accord and satisfaction of any claims or defenses arising out of the sale of the defective down goods, and therefore EMS is barred from asserting its claims regarding these goods. Second, UCB argues that the claims of EMS for offsets did not accrue before notice of assignment and therefore cannot be asserted under Mass. Gen. Laws Ann. ch. 106 [UCC], § 9-318(l)(b). Finally, UCB contends that each of the 189 invoices to which the unpaid amounts correspond constitutes a separate contract and that EMS raised objections to the stated amounts of only two of these invoices. Thus, UCB asserts, EMS has no valid defense as to amounts due on 187 of the invoices and cannot offset its claims on the two to which it did raise objection against amounts owed to UCB on the remaining 187 invoices or contracts. The parties have agreed that the law of the Commonwealth of Massachusetts applies to every aspect of this controversy. II. Nature of the Relationships Among UCB, EMS and Snow Lion During the period from May 19, 1975 through January of 1978, EMS and Snow Lion had a continuing business relationship. Pursuant to a series of purchase orders placed by EMS, Snow Lion sold and delivered to EMS various goods including garments and other items filled with “down” (i.e., goose down and/or duck down), as well as garments and other items insulated with synthetic fibers. Snow Lion’s sales to EMS accounted for a substantial portion of Snow Lion’s business. Snow Lion maintained an audit system for billing its customers by means of invoices, credit memos, and regular monthly statements. When Snow Lion accepted an order and shipped merchandise to a customer, it simultaneously provided the customer with an invoice setting forth the charges for the merchandise. If a customer objected to a particular invoice and Snow Lion verified the objection, the account was modified by means of an adjustment. In most cases the adjustment was reflected by means of a credit memo issued by Snow Lion and by adjustment entries on the monthly statement issued by Snow Lion. These monthly statements recapitulated all transactions — including invoices, credits, and payments — between Snow Lion and the customer and stated the total amount due Snow Lion on the account. The evidence shows that Snow Lion did not automatically apply payments or credits to a customer’s current or oldest invoices. An information sheet on billing issued by Snow Lion to its customers directed each customer to specify, when making a payment, the particular invoice to which the customer wanted the payment to apply. In addition, if the customer had received a credit memo, the customer was directed to state the invoice to which the customer wanted the credit applied. See Exhibit 31. Snow Lion’s relationship with EMS was no different from its relationship with other customers, and Snow Lion followed these billing practices on its account with EMS. From time to time EMS would seek adjustments of particular invoices and if the adjustments were granted, a credit memo would usually be issued by Snow Lion. The course of dealing between Snow Lion and EMS was such that, if Snow Lion issued credits on a particular transaction after EMS had already paid the invoice reflecting that transaction, Snow Lion would allow EMS to apply the credits against unpaid invoices relating to other transactions. E.g., Deposition of William Simon, at 43-44, 53; Tr. II-4-5. UCB’s relationship with Snow Lion began on or about March 18, 1977, when Snow Lion and the bank entered into an accounts receivable financing agreement, the terms of which are set forth in a Security and Loan Agreement. Exhibit 1. Under this agreement, UCB undertook to lend Snow Lion an amount not greater than 85% of the net amount owing on Snow Lion’s accounts receivable. As security for the loan, Snow Lion gave, UCB a security interest in, among other things, all of Snow Lion’s accounts receivable and other contract rights existing at the time a given loan was made or arising thereafter. On June 9, 1977, UCB perfected its security interest in the accounts receivable of Snow Lion by filing a financing statement with the Secretary of State of the State of California. The agreement between UCB and Snow Lion operated on a “revolving credit” arrangement. Snow Lion invoices issued to customers were forwarded to UCB, and UCB added the face amount of these invoices to a record it kept of the balance of outstanding Snow Lion invoices. Periodically, Snow Lion would request from UCB an advance or a loan of funds. At the discretion of UCB and on the condition that the total amount of loans to Snow Lion did not exceed at any given time 85% of the net amount owing on Snow Lion’s accounts receivable, UCB periodically increased its loans to Snow Lion as requested. The total balance of the loan outstanding from UCB to Snow Lion, like the amount of Snow Lion’s outstanding accounts receivable, was recorded from time to time by UCB. Under the terms of the Security and Loan Agreement, all collection costs incurred by UCB were added to the balance owed by Snow Lion to UCB. Beginning sometime in early June, 1977, UCB informed all customers of Snow Lion in writing that all of their accounts then owed or thereafter owed to Snow Lion had been transferred and assigned to UCB. On June 14, 1977, by letter, UCB sent a notice of assignment to EMS and directed EMS to make all future payments on its Snow Lion account directly to UCB. The letter also requested EMS’s acknowledgment of the assignment. Exhibit C. On June 15, 1977, EMS received the letter from UCB, and on July 5, 1977 EMS acknowledged receipt of the notice of assignment by signing the letter and returning it to UCB. Exhibit D. After June 27, 1977, EMS made all payments on the outstanding balance of its Snow Lion account as directed by UCB. EMS forwarded to UCB checks made payable to “Snow Lion/United California Bank.” III. Shipments of Defective Merchandise A. Chevron Vests On or about March 29, 1977, Snow Lion delivered to EMS in Boston pursuant to a previous order a total of 8,000 down-filled Adult Chevron Vests and 2,000 down-filled Child’s Chevron Vests. The Snow Lion invoice evidencing this shipment reads in pertinent part as follows: Model Quantity No. Ordered Shipped Description Price Amount 160333 8,000 2,000 Chevron Vest 13.70 $109,600 160341 8,000 2,000 Child’s 10.50 21,000 Chevron Vest Total: $130,600 The Chevron Vests were labeled as “down” garments and, as requested by EMS, carried an EMS label. When the goods arrived in Boston, Mr. Caleb Canby, who was then in charge of purchasing at EMS, noted that the packaging arrangement for the vests was of a type he had never previously observed. Each vest was rolled and packed in a nylon sack. The vests were also damp. Mr. Canby attributed this dampness to the fact that the goods had traveled by sea to Boston. In addition to these packing and shipping problems, Mr. Canby observed that the vests had very little loft — in other words, they were not “thick” but “flat.” The loft or thickness of a down-filled garment is an indication of the garment’s ability to keep the wearer warm. For some time prior to 1977, EMS had focused in its advertising and mail order catalogs on loft as an item of consumer interest and as a measure of the insulating ability and therefore the quality of a down-filled garment or sleeping bag. Mr. Canby also noticed that the Chevron Vests were overcalendarized (i.e., the nylon exteriors of the vests were “shiny” and “brittle”). Calendarization is a process by which nylon is made “down proof” so as to keep the down insulating materials within the garment. Shortly after these Chevron Vests arrived at EMS, Mr. Canby brought the condition of the vests to the attention of Snow Lion by telephoning Mr. Gutram Jordan at Snow Lion. A cable describing the packing problem was also sent to Mr. William Simon at Snow Lion. E.g., Exhibit YY at 7; Deposition of William Simon, at 14, 21; Deposition of Caleb Canby, at 13-15; Tr. 11-53. B. Northern Light Parkas On or about April 6, 1977, Snow Lion delivered to EMS in Boston pursuant to a previous order a total of 1,021 down-filled Northern Light Ripstop Parkas and 982 down-filled Northern Light Taffeta Parkas. The Snow Lion invoice reflecting this shipment provides in pertinent part as follows: Model Quantity No. Ordered Shipped Description Price Amount 300R 1008 1008 Northern Light Ripstop $48.50 $48,888 300S 1008 1008 Northern Light Super [Taffeta] $51.50 $51.912 Total: $100,800 The Northern Light Parkas were labeled as “down” garments, and they carried EMS’s private label. Because only 2003 parkas were actually delivered, a credit in the amount of $708.50 was subsequently issued to EMS. Exhibit 10. When these goods arrived at EMS, Mr. Canby observed that the parkas, like the Chevron Vests, were rolled and packed in nylon sacks. He also noted that the parkas were low in loft and that some of them were over-calendarized. Sometime in May, 1977, when Martin Stilling and John Bragg of Snow Lion visited EMS in Boston, EMS representatives complained to Snow Lion about the condition of the garments. Exhibit YY at 7-8; Deposition of William Simon, at 17-18, 21-22, 61; Deposition of Caleb Canby, at 17-18; Tr. 25-27, 61-62. C. EMS Super Down Jackets On or about April 18, 1977, Snow Lion delivered to EMS in Boston pursuant to a previous order a total of 3,022 down-filled Super-Down Jackets. The Snow Lion invoice evidencing this shipment provides in relevant part: Model Quantity No. Ordered Shipped Description Price Amount 20270 3024 3024 EMS Super-Down $31.00 $93,744 Jacket There was a minor error regarding the shipment in that only 3022 items — two fewer than the number referred to in the invoice — were actually delivered. Like the Chevron Vests and Northern Light Parkas, the Super-Down Jackets were labeled as “down” and marked with the EMS private label. They were packaged in the same unusual fashion in which the previous two shipments had been packaged: in a rolled condition in nylon pouches. They were also observed to have very little loft. By June 7, 1977, EMS notified Snow Lion of these problems with the goods. E.g., Exhibit YY, at 8; Deposition of William Simon, at 19-20, 21, 61; Deposition of Caleb Canby, at 25-27; Tr. 11-56-58. D. Waban Parkas Sometime in November or December of 1977, Snow Lion delivered to EMS in Boston an order of Adult Waban Parkas, garments filled with synthetic fiber insulation and marked with the private EMS label. The shipment of the Waban Parkas arrived late, having been ordered by EMS from Snow Lion for delivery on or before April 1, 1977. On October 18, 1977, before the delivery of these parkas, EMS made a payment to Snow Lion that mistakenly made reference to the $59,400 invoice price of then undelivered Waban Parkas. Exhibit 5. Subsequently a credit memo was issued for this incorrect payment. When the parkas arrived, the shipment contained fewer garments than EMS had ordered. EMS informed Snow Lion that the shipment was short, and the invoice was adjusted to reflect the fact that the shipment included 1850 garments with an invoice price of $29.70 for a total amount of $54,945. Because the parkas were delivered late, Mr. Canby shipped them out to the various EMS retail stores immediately after they arrived. When he began to receive complaints about the quality of the garments from personnel in the stores, Mr. Canby went out to inspect the garments. He discovered at least two problems with the parkas: the nylon exteriors were over-calendarized, and the Polarguard bats with which they were filled were not uniform. Sometime in December of 1977, EMS informed Snow Lion by telephone of the delivery and the condition of the parkas. In addition, in early to mid-January of 1978, when Barry Solloway and John Bragg of Snow Lion visited EMS headquarters in Peterborough, New Hampshire to discuss general business problems, Mr. McDonough of EMS discussed with them the defects in the Waban Parkas. Exhibit YY, at 10-11; Tr. 11-72-74; Deposition of Alan McDonough, at 89-91; Deposition of Caleb Can-by, at 79-81. IV. Payments and Adjustments On June 7 and 8, 1977, Messrs. William Simon, Martin Stilling and John Bragg of Snow Lion met in Boston with Messrs. Can-by, McDonough, and Roger Furst of EMS. EMS had complained to Snow Lion about the quality of the three recent shipments of down garments — the Chevron Vests, Northern Light Parkas, and Super Down Jackets. The purpose of the meeting between these representatives of the two companies was to discuss the condition of these goods. By-June 8, 1977, EMS had received the results of tests that had been performed on one of the Chevron Vests and one of the Super Down Jackets. The test results showed that the down in these two products had a poor lofting capacity or “filling power.” Plaintiff does not dispute that the filling power of the vests and jackets did not conform to the contract specifications supplied by EMS to Snow Lion. Plaintiff’s Amended Findings of Fact # 33 and # 35, at 13. See also Exhibits N, 0; Deposition of Caleb Canby, at 29-30. The Northern Light Parkas lofted somewhat better than the vests and jackets, and by June 8, 1977, EMS had not had any tests conducted on the parkas. At the June 7 and 8, 1977 meeting, the test results on the vests and jackets were shown to Snow Lion representatives. The discussion focused on the poor lofting ability and the over-calendarized exteriors of the garments. As a result of this meeting, Snow Lion agreed to give EMS the following credits: (1) $2.50 off the original invoice price on each of the Chevron Vests, for a total credit of $25,000 on the vests; and (2) $1.00 off the original invoice price on each of the Super Down Jackets, for a total credit of $3,024 on the jackets. No adjustment was made on the price of the Northern Light Parkas, but Snow Lion did agree to extended dating for the garments. The credits granted at the June meeting were in the nature of initial credits. The selling season for these garments ran from approximately August through December, and in early June there was little way of telling for what price the goods could be sold or how many of them would sell. In addition, Mr. Simon suggested that the appearance and thus the marketability of the garments might improve if EMS were to dry and hang them, and EMS agreed to follow this suggestion. Throughout the negotiations, Mr. McDonough consistently stated that, although EMS had accepted delivery of the goods, EMS expected to maintain the gross dollar profit margin that it would have realized from the sale of the goods had they not been defective. Deposition of William Simon, at 30-31, 34, 95; Deposition of Caleb Canby, at 27, 66-68, 8.6-88; Tr. 11-57-58, 59, 67-69. A matter unrelated to the shipments of defective merchandise was also discussed at the meeting on June 7 and 8, 1977. Sometime in 1975 or 1976, Snow Lion had agreed to reimburse EMS for costs incurred in advertising Celanese Polarguard products in EMS’ semi-annual catalogs. The credit arrangement agreed upon was as follows: after displaying the Polarguard products in its catalogues, EMS was to provide Snow Lion with documentation of the advertising and its costs; Snow Lion would then submit the credit claim and documentation to Celanese Corporation, the manufacturer of Polarguard; after Celanese paid Snow Lion the submitted amount, Snow Lion was to reimburse EMS by issuing a credit to EMS for the amount Snow Lion had received from Celanese. Deposition of William Simon, at 44-46, 90-91; Tr. 11-81-82, III — 22, 23, 171. Credits for advertising undertaken before June, 1977 became a topic of discussion at the June 7 and 8 meeting. Mr. McDonough pointed out that EMS had not received credit for advertising costs incurred in previous years and requested a $35,000 advertising credit from Snow Lion. After negotiation, Mr. Simon agreed to grant EMS a credit in the amount of $25,000. Simon agreed to give EMS the $25,000 advertising credit whether or not EMS submitted documentation of its costs and whether or not Celanese paid Snow Lion this amount. Deposition of William Simon, at 88-91; Tr. 11-82-84, III — 24-26. Subsequently, on June 27, 1977, EMS made a payment to Snow Lion. As previously directed by UCB and Snow Lion, EMS mailed a check for $258,166, made payable to Snow Lion/United California Bank, to United California Bank, P.O. Box 39185 RINCON Annex, San Francisco, California 94139. This payment by EMS made specific reference to the invoices for the Chevron Vests and Super Down Jackets and to the $25,000 and $3,024 credits against those invoices agreed to on June 7 and 8, 1977 but not yet issued by Snow Lion. Exhibit 4. On September 12, 1977, Snow Lion confirmed its agreement to the credits on the Chevron Vests and Super Down Jackets by issuing two credit memos to EMS. The credit memos provided in pertinent part as follows: 9/12/77 Defective Merchandise on Invoice No. 37682 $25,000 9/12/77 Defective Merchandise on Invoice No. 39661 $3,024 Exhibits 13 and 14. After drying, hanging, and fluffing many of the down garments as suggested by Snow Lion, EMS attempted during the summer and fall of 1977 to sell the goods in its retail stores and through its mail order catalogs. EMS experienced problems in selling the goods, however, and continued to register complaints with Snow Lion. On or about August 8, 1977, EMS received the results of a test it had commissioned on a sample from the Northern Light Parkas. The test results confirmed that the filling power or lofting capacity of the parkas, like the vests and jackets, was below the contract specifications supplied by EMS to Snow Lion. Plaintiff’s Amended Findings of Fact # 32, at 12; Exhibit P. See also Deposition of Caleb Canby, at 29-30. Sometime in early November, 1977, Messrs. Simon and Stilling traveled to EMS’s new headquarters in Peterborough, New Hampshire and met with representatives of EMS, including Messrs. McDonough and Canby. Following negotiations between the parties, Snow Lion agreed to issue further credits on the defective down products, resulting in final prices on the garments as follows: (1) $8.00 for each Adult Chevron Vest; (2) $5.70 for each Child’s Chevron Vest; (3) $24.50 for each Super Down Jacket, to be reduced to $19.50 for each jacket if EMS was unable to sell substantial quantities (around 60%) of the jackets; (4) $47.50 for each Northern Light Ripstop Parka; and (5) $50.50 for each Northern Light Taffeta Parka. Tr. 67, 70; Exhibit YY, at 9 — 10. Again at the November meeting, as at the meeting of June 7 and 8, 1977, Mr. McDonough reiterated his position that EMS expected to maintain the gross dollar profit margin it would have realized on the sale of these garments as warranted. Deposition of William Simon, at 95; Deposition of Caleb Canby, at 86-88; Tr. 11-67-69. Another matter of concern to EMS was discussed at the November meeting. In October of 1977, Snow Lion and a number of other manufacturers had been indicted in California for selling illegal down. When Mr. McDonough asked Mr. Simon about the nature of the litigation in California — specifically, whether or not it would be a problem for EMS, Mr. Simon assured McDonough that EMS had nothing to worry about. Simon stated that “it was a mistake,” that “the tests had been done too harshly,” and that Snow Lion’s “down was as good as everybody else’s down.” Tr. 11-79, III — 12—13; Deposition of Caleb Can-by, at 40. On January 6, 1978, Snow Lion issued a credit memo to EMS in the amount of $54,-005.40. Although both parties agree that the memo was intended to memorialize the credits granted at the November, 1977 meeting on all three sets of down garments, the credit memo referred only to “defective merchandise regarding invoice # 37682.” Exhibit 17. Invoice 37682, which had already been paid by EMS, was the invoice pertaining to the delivery of the Chevron Vests. V. Failure of Down Goods to Conform to FTC Guidelines On or about January 11, 1978, the Attorney General’s Office of the State of Maine analyzed samples from an EMS store in Maine of the Chevron Vests (Adult and Child’s), Northern Light Parkas, and Super Down Jackets. The test results showed that these samples did not meet Federal Trade Commission (“FTC”) requirements for goods labeled as “down.” At all relevant times in 1977 and 1978, the FTC guidelines for down content for goods labeled as “down” provided in pertinent part as follows: 16 C.F.R. § 253.6 Tolerances in filling material. (a) Down products. The term “down” may be used to designate any industry product containing the following filling material: Percent (1) Down plumules, and down fiber (minimum) ........................... 80 Consisting of: Down and plumules (minimum)...... 70 Down fiber (maximum) ............ 10 (2) Remainder......................... 20 Consisting of: Down fiber, waterfowl, feather fiber and waterfowl feathers, and— Non waterfowl feathers and nonwaterfowl feather fiber (maximum)..... 2 Residue (maximum) ............... 2 (b) Waterfowl feather products. The term “waterfowl feathers” may be used to designate any plumage product containing the following filling material which is free of quill and crushed feathers: Percent Waterfowl feathers (minimum) ........... 80 Nonwaterfowl feathers (maximum)........ 8 Residue (maximum)..................... 2 Shortly after January 11, 1978, EMS received notification from the Attorney General’s Office of the State of Maine of the results of the tests conducted on the goods EMS had purchased from Snow Lion. Upon receiving this notification, EMS removed its Snow Lion Chevron Vests, Super Down Jackets, and Northern Light Parkas from sale to the public and had independent tests conducted on the garments. The results of these tests confirmed that the goods did not conform to the FTC requirements and thus were mislabeled as “down.” Exhibits R-V. When Mr. Salloway and Mr. Bragg of Snow Lion came to EMS headquarters in Peterborough, New Hampshire in early to mid-January of 1978, Mr. McDonough informed them about the results of the investigation by the Attorney General’s Office of the State of Maine. Tr. Ill — 33— 35; Exhibit YY, at 11. On February 3, 1978, EMS entered into an Assurance of Discontinuance with the Attorney General’s Office of the State of Maine. The Assurance of Discontinuance states in relevant part: Pursuant to the Maine Unfair Trade Practices Act, 5 M.R.S.A. § 206 et seq., the Office of the Attorney General has investigated allegations that Valley Sports, Inc., d/b/a Eastern Mountain Sports, Inc., was offering for sale parkas and other garments labelled as down or down-filled, when, in fact, such garments did not contain at least 80 percent down and down fiber as required under Federal Trade Commission regulations for the feather and down products industry, effective December 29, 1971, and published at 16 CFR 253. The Office of the Attorney General has found these allegations to be supported as to the following garments: Eastern Mountain Sports Super Sweater Eastern Mountain Sports Northern Light Parka Eastern Mountain Sports Taiwanese Chevron Vests Eastern Mountain Sports Taffeta Bugaboo (Mongol) Parka Valley Sports, Inc., d/b/a Eastern Mountain Sports, Inc., pursuant to 5 M.R. S.A. § 210, acknowledges that the insulation of some of said garments does not reach the required 80 percent of down and down fiber and that such garments were sold by them. The Assurance of Discontinuance that EMS entered into with the Attorney General’s Office of the State of Maine also provides as follows: Valley Sports, Inc., d/b/a Eastern Mountain Sports, Inc., stipulates and agrees to conduct a recall program of the garments noted above and any other down products which it discovers contain less than the required 80 percent down and down fiber with due regard for variances attributed to testing error. Said recall program shall allow customers who purchased garments from job lots in which defective garments have been discovered, to return these garments for a full refund of their purchase price. Said recall program shall be conducted by writing to all Maine customers who purchased the garments by catalog sales, all Maine customers who appear on Eastern Mountain Sports retail customer list, and by placing appropriate ads at least one quarter of a page in size and appearing on at least two separate occasions in Maine papers where Eastern Mountain Sports has previously advertised in Maine. Thereafter, EMS engaged in a nationwide recall program in all the market areas where EMS’s sixteen retail stores were then located. In all the newspapers in the areas where EMS habitually advertised, a recall notice was prepared and run on two separate occasions during the first week of February, 1978. Where the Sunday paper was a different publication from the daily, EMS ran a recall notice on two consecutive Sundays. Each notice exceeded slightly the size of a one-quarter page advertisement. See Exhibit 30. Each EMS store maintains a list of local retail customers who have requested to have their names on the list. A recall notice flyer substantially similar in format to the notice published in the newspapers was mailed to each customer whose name appeared on an EMS list. In addition, a recall notice was sent to each mail order customer shown on EMS’s records to have purchased one of the defective down garments between the appropriate dates. Although the recall notices stated a cut off date of March 1, 1978 for returning the offending articles, EMS made refunds or adjustments for the few returned articles that came in after that date. The direct costs related to the EMS recall are as follows: A. Recall Flyer (145,000) - printing/prep. $ 3,507.05 - postage 10,744.51 - labels 900.82 $15,152.38 B. Newspaper Advertising - typesetting $ 129.80 - ad placement 12,377.10 $12,506.90 C. Office and processing - supplies $ 1,372.04 - employee hours 520.00 - TOTAL $ 1,892.04 $29,551.32 Tr. Ill — 158—161; Exhibit YY, at 18-19. Of the six items included in the recall, only four — the Adult Chevron Vests, the Child’s Chevron Vests, the Northern Light Parkas, and the Super Down Jackets — were manufactured by Snow Lion. Refunds made to customers on the defective Snow Lion garments totaled approximately $12,340.13. Tr. Ill — 161—163. After EMS entered into the Assurance of Discontinuance with the Attorney General’s Office of the State of Maine, EMS sold most of the remaining Chevron Vests, Super Down Jackets, and Northern Light Parkas as “seconds” in its bargain basement store in Boston. Signs informing customers that the articles did not conform to FTC guidelines for goods labeled as “down” were placed on the garments, which sold at substantially reduced prices. E.g., Tr. Ill — 104— 105. After the events of January, 1978, EMS withheld payment to Snow Lion/UCB on EMS’s account with Snow Lion, including amounts owed on the sale of the Northern Light Parkas and Waban Parkas. VI. Breach of Warranty or Contract Claims Arising Out of Sale of Down Goods A. Existence of Breaches It is uncontroverted in this case that EMS accepted the Chevron Vests, Northern Light Parkas, and Super Down Jackets purchased from Snow Lion. The legislature of the Commonwealth of Massachusetts has enacted the Uniform Commercial Code, the controlling provision of which provides that “the burden is on the buyer to establish any breach with respect to goods accepted.” Mass.Gen.Laws Ann. ch. 106 [UCC], § 2-607(4). UCB does not dispute that the three shipments of down goods sold by Snow Lion to EMS contained the following two defects: (1) the filling power or lofting capacity of the merchandise failed to conform to the contract specifications for filling power or lofting capacity; and (2) the down content of all three sets of garments failed to conform to FTC guidelines for products labeled as “down.” In addition, I find that at least the Chevron Vests and Northern Light Parkas were defective in that their nylon exteriors were over-calendarized. I conclude that each of these defects constituted a breach of contract or warranty, express or implied. First, by failing to ensure that the three shipments of merchandise conformed to contract specifications for filling power or lofting capacity, Snow Lion violated the contracts or express warranties for the goods. Mass. Gen.Laws Ann. ch. 106 [UCC], § 2-313(l)(b). Second, by selling EMS down garments that failed to meet applicable FTC guidelines for products labeled as “down,” Snow Lion violated the implied warranties of merchantability for the Chevron Vests, Northern Light Parkas, and Super Down Jackets. As these goods carried “down” labels, they were warranted by Snow Lion to contain the down content prescribed by federal law for products bearing those labels. Mass.Gen.Laws Ann. ch. 106 [UCC], § 2-314(2)(f). Finally, the implied warranties of merchantability for the Chevron Vests and Northern Light Parkas were violated by reason of the over-calendarization, which rendered the goods incapable of passing without objection in the winter clothing market. Mass.Gen.Laws Ann. ch. 106 [UCC], § 2-314(2)(a). B. Adequacy of Notice Massachusetts law provides that, in order to recover damages caused by any breach of contract or warranty, a buyer who accepts non-conforming goods must notify the seller of the breach within a reasonable time after the buyer discovers or should have discovered the breach. Mass.Gen.Laws Ann. ch. 106 [UCC], §§ 2-607(3)(a), 2-714(1). The leading decision by the Supreme Judicial Court of Massachusetts construing Mass.Gen.Laws Ann. ch. 106 [UCC], § 2-607(3)(a) is Nugent v. Popular Markets, Inc., 353 Mass. 45, 228 N.E.2d 91 (1967). In Nugent, the Supreme Judicial Court held that the standard for what constitutes adequate notice of breach under § 2-607(3)(a) was intended to be less rigorous, at least as applied to a retail consumer rather than a “merchant buyer,” than that required by § 38 of the former Massachusetts Sales Act, which was superseded by the Uniform Commercial Code. In reaching this conclusion, the court relied on and quoted from the official comment to § 2-607(3)(a): The time of notification is to be determined by applying commercial standards to a merchant buyer. A ‘reasonable time’ for notification from a retail consumer is to be judged by different standards so that in his case it will be extended, for the rule of requiring notification is designed to defeat commercial bad faith, not to deprive a good faith consumer of his remedy. The content of the notification need merely be sufficient to let the seller know that the transaction is still troublesome and must be watched. There is no reason to require that the notification which saves the buyer’s rights under this section must include a clear statement of all the objections that will be relied on by the buyer .... Nor is there reason for requiring the notification to be a claim for damages or of any threatened litigation or other resort to a remedy. The notification which saves the buyer’s rights under this article need only be such as informs the seller that the transaction is claimed to involve a breach, and thus opens the way for normal settlement through negotiation. Uniform Commercial Code, 1962 Official Text with Comments, § 2-607 comment 4, partially quoted in Nugent, 353 Mass. at 48-49, 228 N.E.2d at 93-94. Comment 4 to the Uniform Commercial Code indicates that § 2-607(3)(a), as applied to merchant buyers, is intended to serve two underlying purposes: encouraging compromise between the parties and promoting good faith in commercial dealings. See T. J. Stevenson & Co. v. 81,193 Bags of Flour, 629 F.2d 338, 360 & n. 46 (5th Cir. 1980), quoting Eastern Air Lines v. McDonnell Douglas Corp., 532 F.2d 957, 972 (5th Cir. 1976). Of course, in order to promote these policies, it is necessary that the buyer inform the seller within a commercially reasonable time that the buyer regards the contract or warranty as broken. Applying these principles to the present case, I find that the notice from EMS to Snow Lion of the first two breaches discovered — the over-calendarization problem and the failure of the goods to loft properly — complies with the dictates of Mass.Gen.Laws Ann. ch. 106 [UCC], § 2-607(3)(a). First, notice of these defects was given within a commercially reasonable time. UCB offered no evidence to refute that EMS gave notice of the non-conforming aspects of the Chevron Vests shortly after their arrival. Having done this, EMS did not act unreasonably in waiting until sometime in May, 1977, when Messrs. Bragg and Stilling came to EMS headquarters in Boston, to inform Snow Lion of similar problems with the Northern Light Parkas, which had been delivered a month or so before the May visit. In addition, having arranged a meeting to be held on June 7 and 8, 1977 at which these breaches could be discussed, EMS did not act unreasonably in waiting until that meeting to notify Snow Lion of defects in the Super Down Jackets, the last of the three shipments to be delivered. The record suggests that the course of dealing between Snow Lion and EMS was to arrange face-to-face meetings to discuss business problems. Moreover, the selling season did not begin until August, and as EMS did not plan to reject the goods, giving notice in May and June left ample time for the parties to attempt to work out a solution to the problems created by the shipments of defective merchandise. That EMS acted in commercial good faith is further attested by the fact that, immediately upon receiving, on June 7 or 8, 1977, the test results showing that the vests and jackets did not conform to the contract specifications for filling power, EMS made these results available to Snow Lion. Tests had not yet been performed on the Northern Light Parkas, because upon arrival they had not appeared as low in loft as the other garments and EMS personnel thought that, given time, they might recover. The record does not reveal the precise content of the notifications of defects given before the June 7 and 8, 1977 meeting. It does show, however, that whatever notice was given served the purposes of Mass.Gen. Laws Ann. ch. 106 [UCC],. § 2-607(3)(a). See Matsushita Electric Corp. of America v. Sonus Corp., 362 Mass. 246, 261-62, 284 N.E.2d 880, 889 (1972). By informing Snow Lion that its shipments of merchandise were defective and by arranging a meeting on June 7 and 8, 1977 to discuss the problem, EMS opened the way for compromise and settlement between the parties. Indeed, the parties approached the problem as business associates attempting to reach satisfactory resolution of the dilemma, keeping in touch with each other during the course of the summer and meeting again in November. Thus, EMS’s communications and conduct both before and at the June 7 and 8, 1977 meeting promoted good faith relations between EMS and Snow Lion. The advancement of good faith in commercial dealings is best served by following a course of action designed to elicit reasonable discussion aimed at working out a mutually acceptable solution between the parties. Remaining to be considered is the issue whether the notice given by EMS to Snow Lion of the last discovered defect in the three sets of goods — the failure of the garments to conform to FTC guidelines for goods labeled as “down” — meets the requirements of Mass.Gen.Laws Ann. ch. 106 [UCC], § 2-607(3)(a). The statute requires the notice of any breach to be given within a reasonable time after the buyer discovers or should have discovered the breach. Mass.Gen.Laws Ann. ch. 106 [UCC], § 2-607(3)(a) (emphasis added). When Snow Lion representatives visited EMS headquarters in early to mid-January, 1978, shortly after the results of the tests conducted by the Attorney General’s Office of the State of Maine were disclosed to EMS, EMS informed Snow Lion that the goods violated federal requirements for down content. Under the notice principles stated above, this notice was timely and adequate unless EMS did discover or should have discovered before January, 1978 that the Snow Lion garments violated the FTC guidelines. UCB argues, although not in connection with the notice issue, that EMS knew at least by the time of the November, 1977 meeting that the goods did not conform to the FTC regulations for down content. In support of this contention, UCB offered evidence that the down content and filling power of a garment are directly related, so that one knowledgeable in the trade or industry who observed problems with the filling power of a garment would have reason to know that the down content of the item was also defective. Moreover, it is not disputed that one familiar with the content of the FTC guidelines would have known, by looking at information contained on the reports of the tests performed on the goods in June and August of 1977, that the articles did not conform to the FTC guidelines. Finally, UCB contends that EMS knew by November of 1977 that Snow Lion had been indicted in California for selling illegal down, and that this knowledge put EMS on notice that goods purchased by Snow Lion violated federal criteria for products labeled as “down.” I find, however, that EMS did not know until around January 11, 1978, when the results of the tests conducted by the Attorney’s General’s Office of the State of Maine were disclosed to EMS, that the three sets of garments in question failed to conform to FTC guidelines for down products. Even though EMS had available to it information from which one fully informed of the content of the FTC guidelines would conclude that the goods contained illegal down, the evidence does not establish that anyone at EMS was familiar with the content of the FTC guidelines. In fact, Mr. Canby and Mr. McDonough both testified that they were unaware of the content of the FTC requirements until January of 1978. Their testimony is supported by the fact that EMS never made reference to the FTC guidelines for down content in its advertising materials or in its mail order catalog. Rather, EMS’s advertising on down products focused exclusively on the issue of loft, promoting the idea that the filling power of a garment is a measure of its ability to keep the wearer warm and thus of its overall quality. In addition, there is every reason to believe that, had EMS known that the goods contained illegal down, EMS would have bargained for far larger credits than it received, particularly for the Northern Light Parkas, at the November, 1977 meeting. UCB cannot prevail on its claim that EMS should have discovered and notified Snow Lion before January of 1978 that the goods violated the FTC guidelines for down content. Having been indicted in California for selling illegal down, Snow Lion knew at the time of the November, 1977 meeting that the down products sold to EMS failed to meet the relevant federal criteria. Yet, in response to questions from Mr. McDonough of EMS about the legality of the down content of the goods, Snow Lion failed to inform EMS of this breach and failed to disclose to EMS the true severity of the legal proceedings pending in California. EMS will not be barred from asserting its claim on the ground that it failed to give timely notice of a breach that Snow Lion already knew about and in bad faith failed to disclose to EMS. To hold that the requirement of timely notice bars EMS’s claim in these circumstances would be to convert § 2-607(3)(a) into a trap to be used against an unwary buyer of products known by a wrongdoing seller to be more seriously defective than the buyer suspected. Such a result would undermine the policies of promoting compromise and good faith in commercial relations that underlie Mass.Gen.Laws ch. 106 [UCC], § 2-607(3)(a). See Barrett Roofing & Supply Co. v. Ross, 131 F.Supp. 348, 352-53 (D.Mass.1955) (under the notice provision of the former Sales Act, Mass.Gen.Laws Ann. ch. 106, § 38, held that where seller knew that goods were defective and would never be acceptable to buyer if true facts were known, seller could not insist on stricter standard requiring notice reasonably soon after buyer should have discovered the breach by inspecting for easily ascertainable defects). In light of the foregoing findings, I conclude that the notice from EMS to Snow Lion that the three shipments of down merchandise failed to conform to guidelines for goods labeled as “down” fulfilled the requirements of Mass.Gen.Laws Ann. ch. 106 [UCC], § 2-607(3)(a). C. Accord and Satisfaction/Waiver of Breach of Warranty Claims UCB contends that EMS is barred from asserting its claims for offsets or damages caused by the defects in the down goods because, at the November, 1977 meeting with Snow Lion, EMS entered into an accord and satisfaction of, or by its conduct waived, any claims or defenses arising out of the sale of those goods. The burden of proving an accord and satisfaction between EMS and Snow Lion rests upon UCB. See Rust Engineering Co. v. Lawrence Pumps, Inc., 401 F.Supp. 328, 333 (D.Mass.1975). I find that no such accord and satisfaction — or any other modification of contractual relation by which EMS released Snow Lion from the claims here asserted for damages or offsets arising from the sale of the defective down products — was reached by EMS and Snow Lion at the November, 1977 meeting. It is undisputed that, at this meeting, Snow Lion responded to EMS’s claims of defects by agreeing to grant certain credits off the invoice prices of the three shipments of down garments. It does not follow, however, that by accepting these credits, EMS entered into “an agreement under the terms of which the dispute [was] compromised.” Id. The evidence establishes that EMS neither intended nor engaged in conduct from which one could reasonably infer that it intended to enter into a “final settlement” of the controversy over the defective merchandise. Id. First, Mr. McDonough of EMS reiterated at the November meeting the position he had taken at the meeting of June 7 and 8, 1977: EMS expected to maintain the gross dollar profit margins it would have realized on the goods had they been delivered as warranted. In other words, EMS refused to relinquish its claim for lost profits on the sale of the down goods, notwithstanding any credits granted by Snow Lion. That EMS clung to this position at the November, 1977 meeting is clearly inconsistent with the notion that EMS entered into a release or accord and satisfaction of all claims or defenses related to the defects then known to EMS. Second, at the time of the November meeting, EMS was not aware that the goods failed to conform to FTC guidelines for products labeled as “down.” For these reasons, I find that EMS did not enter into a binding accord and satisfaction or release of claims for offsets or damages flowing from that breach. See J. F. White Contracting Co. v. New England Tank Industry of New Hampshire, 393 F.2d 449, 450-51 (1st Cir. 1968). Moreover, had EMS and Snow Lion reached an accord and satisfaction at the November, 1977 meeting, the agreement might well be unenforceable by reason of Snow Lion’s failure to disclose to EMS at that meeting the severity of the pending legal proceedings in California. The law would not permit UCB, as assignee, to claim the benefit of its assignor’s accord and satisfaction with EMS and at the same time disregard defects in the making of that accord and satisfaction that would preclude its assignor from enforcing it against EMS. Under Mass.Gen.Laws Ann. ch. 106 [UCC], § 2-209(4), an “attempt at modification”, although failing to satisfy the criteria for modifications set forth in § 2-209(2) and (3), may nevertheless operate as a waiver. However, in light of the findings stated above, I conclude that EMS did not by its conduct at the November, 1977 meeting “waive” the claims asserted in this action for lost profits and consequential damages flowing from the sale of the nonconforming down goods. VII. Breach of Warranty or Contract Claims Arising Out of Sale of Waban Parkas EMS proved at trial that the Waban Parkas contained at least the following defects: (1) the nylon exteriors were over-calendarized; and (2) the Polarguard bats with which the parkas were filled were not uniform. It may well be that each of these defects constituted a breach of express warranty, particularly in view of evidence that EMS often ordered Snow Lion products after viewing samples of the goods. See Mass.Gen.Laws Ann. ch. 106 [UCC], § 2-313(l)(c). I need not decide, however, whether any express warranty for the Waban Parkas was violated, because I conclude that the implied warranty of merchantability for the garments was violated by reason of these defects. See Mass.Gen.Laws Ann. ch. 106 [UCC], § 2-314(2)(a), (c), and (d). In addition, the evidence supports EMS’s claim that the contract for the parkas was broken by reason of late delivery. Thus, although EMS accepted the Waban Parkas, EMS has met its burden of proving one or more breaches with respect to these goods. Mass.Gen.Laws Ann. ch. 106 [UCC], § 2-607(4). In view of the findings stated in part III-D, supra, I conclude also that EMS gave Snow Lion timely and adequate notice of the defects in the Waban Parkas. See Mass.Gen.Laws Ann. ch. 106 [UCC], § 2— 607(3)(a). The first notice that the goods were defective was given to Snow Lion within the same month that the parkas were delivered. In the circumstances of this casé, a month’s delay between discovery and notice of a breach cannot be characterized as unreasonable. There is no evidence of the precise content of the notice given in December of 1977. The record shows, though, that EMS and Snow Lion representatives discussed the problem created by the condition of the parkas at the January, 1978 meeting. Thus, whatever notice was given in December was sufficient to pave the way at least for initial efforts between the parties to settle the controversy. That Snow Lion entered into bankruptcy proceedings during January of 1978 may well have stifled any further negotiations regarding the Waban Parkas. This fact, however, cannot prejudice the rights of EMS, which acted in commercial good faith with respect to informing Snow Lion of Waban Parka defects. See Uniform Commercial Code, 1962 Official Text with Comments, § 2-607 comment 4, partially quoted in Nugent, 353 Mass, at 48-49, 228 N.E.2d at 93-94; see also T. J. Stevenson & Co., 629 F.2d at 360 & n. 46. The question whether EMS gave Snow Lion adequate notice that the agreement for the sale of the Waban Parkas had been broken by reason of late delivery is more difficult to answer on the record before me. The agreement between the parties provided that the parkas were to be delivered on or before April 1, 1977, and the inference may therefore be drawn that EMS knew or should have known around that date that Snow Lion had failed to comply with the deadline for delivery. There is no evidence that at any time after April 1, 1977 EMS sent any oral or written communications urging delivery of the goods as soon as practicable. On the other'hand, the record shows that, during the summer and fall of 1977, EMS informed Snow Lion that the parkas had not yet been delivered. During this period, and again in December of 1977 and January of 1978, the parties discussed the subject of extended dating for the late garments. Deposition of William Simon, at 73-74; Deposition of Alan McDonough, at 66-67. Thus, Snow Lion was on notice that EMS considered the contract broken. As a result of notice given to Snow Lion by EMS, the parties attempted to make at least some progress toward settling the controversy over the late delivery. In addition, given that the selling season for the Waban Parkas did not begin until August of 1977, EMS did not act in a commercially unreasonable manner in waiting until the early summer of 1977 to inform Snow Lion that the goods had not arrived. In view of these findings, I conclude that EMS gave Snow Lion sufficient notice of the breach of contract by reason of the late delivery. Mass.Gen.Laws Ann. ch. 106 [UCC], § 2-607(3)(a). ■ VIII. Breach of Agreement for Advertising Credits Under the original agreement for advertising credits entered into in 1975 or 1976 between EMS and Snow Lion, EMS was to receive credits from Snow Lion only after fulfillment of the following two conditions: (1) that EMS supply to Snow Lion the documentation that Snow Lion would be required to submit to Celanese Corporation, the manufacturer; and (2) that Snow Lion first receive payment from Celanese Corporation for the credits submitted on behalf of EMS. On the findings stated in part IV, supra, however, I conclude that at the June 7 and 8, 1977 meeting EMS and .Snow Lion entered into a new or substituted agreement. Under the hew agreement, EMS promised to abandon its claims for credits for advertising services previously rendered in exchange for Snow Lion's promise to issue EMS a credit in the amount of $25,-000. An explicit term of the new agreement was that neither of the two conditions attached to the original agreement would have to be fulfilled. Thus, the new agreement was in the nature of an accord and satisfaction or discharge of existing rights and duties under the original 1975 or 1976 agreement. See generally 6 Corbin, Contracts § 1293, at 189 (2d ed. 1962). As EMS’s claim for advertising credits from Snow Lion was made in the good faith belief that the claim was well founded, the substituted June agreement was supported by sufficient consideration and thus was valid. Blair v. Cifrino, 355 Mass. 706, 708, 247 N.E.2d 373, 375 (1969). See also Zlotnick v. McNamara, 301 Mass. 224, 225-26, 16 N.E.2d 632, 633 (1938). Plaintiff does not dispute that Snow Lion never issued the agreed upon $25,000 credit to EMS. I therefore conclude that EMS has proved a breach of the substituted agreement of June 7 and 8, 1977. The evidence does not show that EMS and Snow Lion ever entered into a new or substituted agreement with respect to credits claimed by EMS for advertising services performed after June 7 and 8,1977. Therefore, the rights and obligations of the parties are governed by the original 1975 or 1976 agreement; under which EMS would be entitled to credits for advertising after June, 1977 only if both of the conditions stated above had been met. There is no evidence that Celanese Corporation ever paid Snow Lion the $12,340.13 amount claimed as a credit by EMS. Nor is there any evidence that Snow Lion failed to use due diligence to obtain any credit for which EMS furnished Snow Lion with documentation. Having failed to establish fulfillment of one of the conditions of the agreement, EMS has not proved a valid claim for breach of contract regarding post-June, 1977 advertising credits. IX. Validity of EMS’s Claims as Offsets Against UGB’s Claim Having concluded in parts VI-VIII, supra, that EMS has proved its respective claims for breach of warranty or contract regarding the defective down goods and Waban Parkas and its claim for breach of contract as to the $25,000 advertising credit, I must now consider whether these various claims may be asserted as offsets against the claim of UCB. Mass.Gen.Laws Ann. ch. 106 [UCC], § 9-318(1) governs the rights of an account debtor against an assignee. Section 9-318(1) accommodates the competing interests of the assignee and the account debtor by separating claims and defenses of the latter against the former into two categories. The first category includes claims and defenses arising out of the terms of the contract from which the assigned account was created. Regardless of when they accrue, these claims and defenses may be asserted by the account debtor as offsets against the amount owed the assignee on the contract or assigned account. Mass. Gen.Laws Ann. ch. 106 [UCC], § 9— 318(l)(a). See Fall River Trust Co. v. B. G. Browdy, 346 Mass. 614, 616, 195 N.E.2d 63, 64 (1964); 2 Gilmore, Security Interests in Personal Property § 41.4, at 1090-91 (1965). As the official comment to § 9-318(1) states, ... When the account debtor’s defenses on an assigned account, chattel paper or a contract right arise from the contract between him and the assignor it makes no difference whether the breach giving rise to the defense occurs before or after the account debtor is notified of the assignment (subsection (l)(a)). Uniform Commercial Code, 1962 Official Text with Comments, § 9-318(1) comment 1. Claims or defenses of the second type contemplated by § 9-318(1) are those that do not arise from the contract of sale that was the subject of assignment. An account debtor may assert these claims and defenses as offsets against the amount owed the assignee on the contract or assigned account only if the claims or defenses accrued before the account debtor received notice of the assignment. Mass.Gen. Laws Ann. ch. 106 [UCC], § 9-318(l)(b). See Fall River Trust Co., 346 Mass, at 616, 195 N.E.2d at 64; 2 Gilmore, Security Inferests in Personal Property § 41.4, at 1090-91 (1965). The official comment to § 9-318(1) states this proposition as follows: . . . The account debtor may also have claims against the assignor which arise independently of that contract: an assignee is subject to all such claims which accrue before, and free of all those which accrue after, the account debtor is notified (subsection (l)(b)). Uniform Commercial Code, 1962 Official Text with Comments, § 9-318(1) comment 1. The three sets of defective down goods that are the subject of EMS’s breach of warranty claims were all delivered before June 15, 1977, the date on which EMS received notice of the assignment to UCB. Under Massachusetts law, “it is clear that a cause of action for breach of a sales contract, express or implied, accrues when delivery is made, regardless of the buyer’s knowledge of the breach.” Wolverine Insurance Co. v. Tower Iron Works, 370 F.2d 700, 702 (1st Cir. 1966). See also Mass.Gen. Laws Ann. ch. 106, [UCC] § 2-725(2). I therefore conclude that each of the claims asserted by EMS for breach of warranty or contract regarding the down goods accrued before notice of the assignment. Because these claims accrued before EMS received notice of the assignment, I conclude that, under Mass.Gen. Laws Ann. ch. 106 [UCC], § 9-318(l)(b), the claims may be asserted as offsets against UCB’s claim. Section 9-318(l)(b) applies specifically to claims or defenses that are not related to the contract or contracts from which the assigned account or accounts receivable were created. Therefore, even if each invoice is assumed to be a separate contract, EMS nevertheless is entitled under § 9-318(l)(b) to offset damages flowing from breaches of the contracts for the down goods against amounts owed to UCB on other assigned accounts or contracts. The Waban Parkas were delivered sometime in December of 1977. Under the standard set forth in Wolverine Insurance Co., 370 F.2d at 702, EMS’s claims of breach of warranty based on defects in these goods did not accrue until December, 1977, after EMS received notice of assignment. UCB does not dispute, though, that EMS’s claims with respect to the Waban Parkas arose from the terms of the contract for the sale of these goods. Nor does UCB dispute that the invoice memorializing this sale was never paid by EMS and is one of the assigned accounts receivable on which UCB now sues. The amount of offsetting damages claimed by EMS is less than the $54,945 amount claimed by UCB on the invoice for the parkas. Thus, even if UCB is assumed to be correct in arguing that each invoice constitutes a separate contract, EMS is entitled under § 9-318(l)(a) to assert as offsets to the amount claimed by UCB on the contract for the sale of the parkas EMS’s claims arising out of that same contract. See Fall River Trust Co., 346 Mass, at 616, 195 N.E.2d at 64 (“If the ... missing goods were processed under the contracts which gave rise to the assigned accounts, it would make no difference when the plaintiff gave [defendant] notice of the assignment. The rights of the assignee would be subject to any defence or claim arising between the terms of the bailment contract between the assignor and the account debtor regardless of notice”). There is another independent ground for holding that EMS may offset against UCB’s claim EMS’s claims with respect to the down goods and its claims regarding the Waban Parkas. The evidence in this ease does not support UCB’s argument that each of the 189 invoices on which UCB sues should be viewed as a separate contract. Rather, the findings stated in part II of this opinion, supra, indicate that the course of dealing between EMS and Snow Lion was to treat the entire EMS-Snow Lion account as a single contract or “running account.” See genera