Minor Breach (Common Law)
Defined: A breach is minor if the obligee gains the substantial benefit of her bargain.
Rule: A minor breach does not relieve the aggrieved party of her performance, but gives her a right to damages for the monor breach.
Material Breach (Common Law)
Rule: If the breach is material the nonbreaching party (i) may treat the contract as at an end, and (ii) will have an immediate right to all remedies for breach of the entire contract, including total damages.
Minor Breach Coupled w/ Anticipatory Repudiation (Common Law)
Rule: If a minor breach coupled with anticipatory repudiation, the nonbreaching party may treat it as a material breach.
- The aggrieved party must not continue on because doing so would be a failure to mitigate damages.
Material Breach of Divisible Contract
Rule: Recovery is available for substantial performance of a divisible part even though there has been a material breach of the entire contract.
Determining Material Breach
Factors:
- Amount of benefit recieved;
- Adequacy of compensation;
- The extent of part performance by breaching party;
- Hardship to breaching party;
- Negligent or willful behaviour; and
- Likilihood the breaching party will perform.
Note: Nonbreaching party must show that he was willing and able to perform.
Timeliness of Performance
If time is of the essence then it is a material breach. Otherwise, failure to perform by the time stated is not material if performed within a reasonable amount of time.
Effect of Acceptance in Article 2 and Right to Reject
Rule: Generally, a buyer’s right to reject under the perfect tender rule is cut off when the buyer accepts goods. A buyer accepts goods when:
- After a reasonable oppurtunity to inspect goods, the buyer indicates to seller that they conform to the requirements or that she will keep them even though they fail to conform;
- She fails to reject within a reasonable time after tender or delivery or fails to notify the seller of the rejection; or
- Does any act inconsistent with seller’s ownership.
Article 2: Buyer Responsibility for Goods after Rejection
Rule: Buyer has obligation to hold goods with reasonable care at the seller’s disposition and to obey any reasonable instuctions as to the rejected goods. If seller gives instructions within a reasonable amount of time then buyer may:
- Reship the goods to seller;
- Store the goods for seller’s account; or
- Resell the goods for selelr’s account.
Article 2: Buyer’s Right to Revoke Acceptance
Rule: Under certain circumstances a buyer may reject goods after they have been accepted. The buyer may revoke acceptance if teh goods have a defect that substantially impairs the value to her and:
- She accepted on the reasonable expectation that the defect would be cured and it has not been; or
- The diffuculty of discovering the defects or because of seller’s assurance that the goods conformed to the contract.
Revocation must occur: (i) within a reasonable amount of time; and (ii) before any substantial change in the goods occur.
Installment Contract Exception to Perfect Tender Rule
Rule: An installment can be rejected only if the nonconformity substantially impairs the value of that installment and *cannot be cured. *
- The entire contract is breach only if the nonconformity substantially impairs the value of the entire contract.
Perfect Tender Rule
Rule: Unlike the common law substantial performance doctrine, Article 2 provides that if goods or their delivery fail to conform to the contract in any way, the buyer generally may:
- reject all,
- accept all,
- or accept any comercial units and reject the rest.
Seller’s Right to Cure (Exception to Perfect Tender)
Single Delivery Contracts:
- Seller can cure by giving notice and new tender within the original time for performance.
- Right to cure beyond original contract time is not allowed unless: buyer rejects a tender of nonconforming goods that the seller reasonably believed would be acceptable. Then upon notification, the seller has further reasonable time which to make conforming tender.
NOTE: Seller’s reasonable belief is acceptable if (i) trade practice or prior dealings with buyer led to seller’s belief; or (ii) seller could not have known of the defect.
Installment Contracts: A defective shipment cannot be rejected if it can be cured.
