(b) That's right. When something is delivered or done in performance of a contract, and there is nothing apparently wrong at the time of performance, it may sometimes happen that a defect makes itself apparent some time later. Defects are considered to be hidden defects if they existed at the time the thing in question was delivered or done, but could not have been discovered by a reasonable examination of the accessible parts of the thing.
If hidden defects in goods or services supplied amount to a breach of condition, or to a serious breach of an innominate term, the non-defaulting party will be entitled to reject what was supplied and put a stop to further performance. Termination of performance is not an available remedy for less serious hidden defects.
The right to terminate performance on grounds of hidden defects exists even though the goods or services were received and used if such use was required to discover the defects. In the present example, the packaging machine suffers from a hidden defect in its internal parts. These defects would not become apparent until some time after delivery and use. It is therefore not too late for B to reject the machine, even though he has installed and used it.