The correct answer is: (B) The baker has the right to revoke his acceptance and obtain a refund of his purchase price if he gives notice within a reasonable time.

This correctly states the circumstances under UCC Section 2-608 when a buyer who has already accepted goods may revoke acceptance. A buyer may revoke his acceptance of a good whose non-conformity substantially impairs the good's value to him if it was difficult to discover the non-conformity before acceptance. In that case, the buyer must give notice within reasonable time to the seller. After rejection, provided the goods are not perishable, the seller has a reasonable time after rejection to give the buyer instructions on what to do with the goods and, failing that, the buyer may store them, ship them back, or resell them (the UCC notes that these are examples, not an exhaustive list of options).

(A) Incorrect. The baker has lost all rights with respect to the defect because he accepted the goods. UCC Section 2-608 permits a buyer, under certain circumstances, to revoke a prior acceptance. One of such circumstances is when a non-conformity of a good substantially impairs its value to the buyer and it was difficult to discover the non-conformity before acceptance.

(C) Incorrect. If he fails to give notice to the businessman, the baker's damages will be limited to the difference between the value the goods would have had if they had been as warranted, and the value they actually have because of the defect.

This is incorrect because it limits damages to a breach of warranty theory, but the baker also has the right to revoke his acceptance and retrieve all of the purchase price, because the non-conformity was difficult to discover and it substantially impairs the value of the goods to the baker.

(D) Incorrect. The baker has the right to all damages flowing from the defect even if he fails to give notice.

The defect must substantially impair the value of the goods. The baker may not revoke his acceptance for an insubstantial defect. The inability of the oven to reach the required temperature is such a substantial defect because it essentially renders the oven unusable by the baker. Second, the defect must not have been obvious from an inspection; here, the defect was not discernible until the oven was installed. Third, the baker must notify the businessman and return the oven. If the baker fails to give notice to the businessman, he will lose both the right to revoke his acceptance and the right to sue for breach of warranty.