Chapter 21

(ACCEPTANCE) A buyer can accept the delivered goods by...

(1) expressly accepting the shipment by words or by conduct, (2) failing to reject the goods with a reasonable period of time after having had the opportunity to inspect the goods, or (3) acting in any manner inconsistent with the seller's ownership (e.g., reselling the goods to a third party).

(TENDER OF DELIVERY) Tender of Delivery requires that the seller...

(1) have and hold conforming goods at the disposal of the buyer, and (2) give the buyer reasonable notice to enable the buyer to take delivery.

(TENDER OF DELIVERY) Unless the parties have agreed otherwise...

(1) the goods must be tendered for delivery at a reasonable hour; (2) the goods must be kept available for a reasonable period of time for the buyer to take possession; and (3) all goods called for by the contract must be tendered in a single delivery, unless the circumstances are such that either party can rightfully request delivery in lots.

(ANTICIPATORY REPUDIATION) If, before the time for a promisor's performance, he clearly communicates to the promisee his inability or intention not to perform, the promisee may...

(1) treat the repudiation as a breach and cancel the contract, (2) treat the repudiation as a breach and sue, (3) wait and see if the repudiating party retracts his repudiation and performs as called for, or (4) seek adequate assurances from the repudiating promisor that he will, in fact, perform as and when performance is due. *In any case, the nonrepudiating promisee may suspend her own performance unless and until the repudiating promisor performs.

(DESTRUCTION OF GOODS) The parties are excused from performance, when...

1) an unexpected event, through no fault of either party, 2) destroys goods identified when the contract was formed, 3) before the risk of damage passed to the buyer. *If the goods are only partially destroyed, the buyer may inspect them and either: (a) void the contract, or (b) accept the damaged goods at a reduced price.

(COMMERCIAL IMPRACTICABILITY) When an occurrence, unforeseen by either party at the time the contract was made, makes performance commercially impracticable...

1) the perfect tender rule no longer applies, and 2) delay in delivery or nondelivery in whole or in part is not a breach of contract, provided that 3) the seller notify the buyer as soon as practicable of the delay or nondelivery; but 4) in the event that the seller is able to at least partially perform, the seller is obligated to: (a) fairly and reasonably allocate any remaining production and deliveries among those to whom it is contractually obligated to deliver the goods, and (b) notify the buyer of the allocation, which the buyer is free to accept or reject.

(LETTERS OF CREDIT) Letter of Credit

A document by which a bank (the issuer) agrees to pay a seller or lessor of goods (the beneficiary) upon the beneficiary's performance of some agreed obligation to a buyer or lessee (the account party), who, in turn, agrees to re-pay the issuer. -As a consequence, distant sellers are assured of receiving payment upon delivery and distant buyers are assured of receiving delivery before paying.

(LETTERS OF CREDIT) Bill of Lading

Documentation, typically required in a letter of credit transaction, evidencing the beneficiary's delivery of the subject of the contract to the account party or some mutually agreed upon bailee (third party).

(GOOD FAITH) Section 1-203 provides:

Every contract or duty within this Act imposes an obligation of good faith in its performance and enforcement.

(PERFECT TENDER: EXCEPTIONS) Agreement of the Parties

Exceptions can be agreed to by the parties in their contract.

Right to Assurance

If one party has "reasonable grounds" to believe that the other party will not perform as agreed, she may, in writing, "demand adequate assurance of due performance" from the other party.

Duty to Cooperate

If one party's performance requires the cooperation of the other party, the second party's failure to cooperate relieves the first party's obligation to perform.

Perfect Tender Rule

If the goods delivered or the tender of delivery fail in any respect to conform with the terms of the contract, the buyer may: (1) accept the goods, (2) reject the entire shipment, or (3) accept part and reject part.

(INSPECTION) C.O.D. Shipments

If the seller ships the goods to the buyer cash on delivery ("C.O.D.") without the buyer's agreement to do so, the buyer may rightfully reject the goods as nonconforming, since C.O.D. shipment does not permit the buyer to inspect prior to making payment.

GOOD FAITH

Obligations of good faith and commercial reasonableness underlie every sales and lease contract under the UCC. -The parties cannot waive or disclaim the UCC's good faith requirement. -"Good faith" for a non-merchant means honesty in fact. -For a merchant, good faith requires both honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade. (In other words, the UCC holds merchants to a higher standard than ordinary persons.)

(ANTICIPATORY REPUDIATION) At any time before the nonrepudiating promisee materially changes her position in reliance on the repudiation, the repudiating promisor may...

retract his repudiation and perform as and when promised.

(INSPECTION) Right to Inspect

The UCC requires that the buyer be given an opportunity to inspect the identified goods as a condition precedent to the seller's right to enforce payment under the contract. -Unless otherwise agreed, inspection can take place at any reasonable place and time and in any reasonable manner, in light of the customs of the trade, past practices of the parties, and the like. -The buyer bears the cost of inspection.

Method of Payment

The buyer may pay by any means specified by the parties, or by any reasonable means if the parties do not specify a method of payment. If the seller insists on cash when a buyer tenders a check or credit card, the seller must give the buyer reasonable time to obtain cash.

(LETTERS OF CREDIT) Independence Principle

The issuer does not warrant either party's performance. Rather, the issuer makes payment on receipt of the bill of lading or other document evidencing performance, and is not obligated to otherwise determine whether performance has been properly made. Therefore, any breach by the beneficiary or account party must be pursued against the breaching party and not the issuer.

(INSPECTION) Payment Due/Documents of Title

Under certain contracts, the buyer must make payment upon receipt of documents of title - even if the goods themselves have not arrived at their destination. Thus, payment may be due before the buyer can inspect the goods, and must be made unless the buyer knows the goods are nonconforming.

(PERFECT TENDER: EXCEPTIONS) Right to Cure

When any tender of delivery is rejected because of nonconforming goods, and the time for performance has not yet expired, the seller can (1) notify the buyer of the seller's intention to cure and then (2) repair, adjust, or replace the nonconforming goods within the time for performance specified in the contract.

Payment Term

When goods are sold on credit, the buyer must pay according to the credit terms provided in the contract, not when she receives the goods.

(PERFECT TENDER: EXCEPTIONS) Substitution of Carriers

When the agreed manner of delivery proves impracticable or unavailable, through no fault of either party, (1) the seller may, at his own expense, use a commercially reasonable substitute, (2) the use of which will constitute sufficient tender.

Installment Contract

Where a contract requires or authorizes delivery in two or more separate lots, to be accepted and paid for separately, (1) the buyer may reject tender only if the nonconformity substantially impairs the value of the installment and cannot be cured; (2) the entire installment contract is breached only when one or more nonconforming installments substantially impairs the value of the entire contract; and (3) if the buyer subsequently accepts a non-conforming installment without notifying the seller of cancellation, the contract is reinstated.

(PLACE OF DELIVERY) Non-carrier contract

Where the contract does not designate the place of delivery for the goods, (1) if the buyer is to pick them up from the seller, the place of delivery is the seller's place of business or residence, if the seller has no regular place of business; or (2) if the goods are being held by a bailee, the place of delivery is the location of the goods.

(PLACE OF DELIVERY) Shipment contract

Where the contract requires or authorizes the seller to ship the goods by a carrier, the seller must: (1) deliver the goods to a carrier; (2) make a contract, reasonable given the nature of the goods and their value, for transport of the goods; (3) obtain and promptly deliver to the buyer any documents of title necessary for the buyer to take possession of the goods from the carrier; and (4) promptly notify the buyer that shipment has been made.

(PLACE OF DELIVERY) Destination Contract

Where the contract requires the seller to deliver or arrange for the delivery of the goods to a particular destination, the seller must: (1) tender the goods at a reasonable hour; (2) keep the goods available for a reasonable period of time for the buyer to take possession; and (3) obtain and promptly deliver to the buyer any documents of title necessary for the buyer to take possession of the goods from the carrier; and (4) promptly notify the buyer that goods are available for her to take delivery.

(ACCEPTANCE) If some, but not all, of the goods delivered are nonconforming, and the seller has failed to cure, the buyer may...

make a partial acceptance, provided that the buyer cannot accept less than a single commercial unit. *Commercial Unit: A unit of goods that, by commercial usage, is viewed as a "single whole" for purposes of sale (e.g., five sticks of chewing gum in a pack, a sleeve of three golf balls).