Performance Issues in UCC Contracts

Question 1

Perfect Tender & Rejection of Goods Definition

Answer 1

Seller’s performance must be perfect with respect to the goods delivered and the manner of delivery.

Question 2

Perfect Tender & Rejection of Goods

Imperfect Tender

Answer 2

Buyer can retain or reject nonconforming goods.

• If seller’s performance is not perfect, buyer can either:

1. Retain goods delivered and sue for damages, or
2. Reject some or all goods and sue for damages

Question 3

Perfect Tender & Rejection of Goods

Rejection for imperfect tender

Answer 3

Buyer must:

1. Notify seller of rejection in a reasonable time
2. Hold the rejected goods using reasonable care
3. Give seller reasonable time to arrange for removal of goods.
   
   1. If seller gives no information regarding removal, buyer can return the goods to seller, store the goods for seller, or resell the goods on behalf of seller.

Question 4

Perfect Tender & Acceptance of Goods

Acceptance of goods occurs if either:

Answer 4

1. Buyer, after reasonable opportunity to inspect the goods, indicates to seller that goods conform or that he will keep them despite nonconformance.
   
   1. Payment without an opportunity to inspect is not acceptance
   2. If buyer accepts the goods, he cannot later reject them.
2. Buyer fails to reject or notify seller of rejection within a reasonable time (no more than one month).

Question 5

Perfect Tender & Acceptance of Goods

Revocation of Acceptance

Answer 5

• Buyer generally cannot reject goods once he has accepted.
• Exceptions – buyer can revoke acceptance within a reasonable time after discovering a defect if the defect substantially imparis the goods’ value and either:
  
  • Buyer accepted goods on the reasonable belief that defect would be cured and it has not been, or
  • Buyer was excusably ignorant of defect or reasonably relied on seller’s assurance that goods conformed.

Question 6

Perect Tender & Seller’s Ability to Cure

Answer 6

If buyer has notified seller of imperfct tender, seller may have an opportunity to cure.

Seller can cure if:

1. Seller gives buyer notice of intent to cure and time for performance has not yet expired.
   
   1. Seller must give reasonable notice and deliver conforming goods.
2. Seller had reasonable grounds to believe nonconforming goods sent would be accetable
   
   1. Based on prior dealings
   2. Seller will have more time to tender goods.

Question 7

Perfect Tender & Installment Contracts

Answer 7

Under an installment contract, a buyer’s ability to reject goods due to imperfect tender is limited.

• Rejection – buyer can only reject a delivery/installment if:
  
  • Nonconformity substantially imparis the installment
  • Nonconformity cannot be cured
    
    • Rejection is limited to nonconformity installment, not the entire contract.

Buyer can only cancel entire contract based on a nonconforming installment if that installment substantially impairs the value of the enitre contract.