Ch 18 Performance and Breach of a Sales and Lease Contract

Choices of the non-breaching party facing anticipatory repudation

1. Treat the repudiation as a final breach by pursuing a remedy. 2. Wait to see if the repudiating party will decide to honor the contract despite the avowed intention to renege

Remedies for the seller when they buyer has the goods

1. the seller can sue 2. seller can retain goods if sold on credit, and the buyer is notified within 10 days of receipt.

Perfect Tender Rule

A common law rule under which a seller was required to deliver to the buyer goods that conformed perfectly to the requirements stipulated in the sales contract. A tender of nonconforming goods would automatically

commercial unit

as a unit of goods that, by commercial usage, is viewed as a "single whole" for purposes of sale and that cannot be divided without materially impairing the character of the unit, its market value, or its use

When a buyers payments begin

at the time and place the goods are received, however if the goods are on credit terms dictate when the payments begin

`Inspection

allows the buyer or lessee to verify that the goods tendered or delivered conform to the contract. If the goods are not as ordered, the buyer or lessee has no duty to pay.

UCC's Good Faith Provision

means honesty in fact. For a merchant, it means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade

Installment Contract is breached

only when one or more nonconforming installments substantially impair the value of the whole contract.

Sellers Obligation Destination Contract

seller agrees to deliver conforming goods to the buyer at a particular destination. The goods must be tendered at a reasonable hour and held at the buyer's disposal for a reasonable length of time. The seller must also give the buyer appropriate notice and any necessary documents to enable the buyer to obtain delivery from the carrier

Tender of Delivery

seller's or lessor's act of placing conforming goods at the disposal of the buyer or lessee and giving the buyer or lessee whatever notification is reasonably necessary to enable the buyer or lessee to take delivery. Must be at a reasonable time and place.

When do credit terms begin

the date the goods are shipped the goods are shipped

Basic Duties of the Seller under the Good Faith Provision

transfer and deliver conforming goods

Seller can attempt to cure

1. A delivery is rejected because the goods were nonconforming. 2. The time for performance has not yet expired. 3. The seller or lessor provides timely notice to the buyer or lessee of the intention to cure. 4. The cure can be made within the contract time for performance.

Exceptions to the Perfect Tender Rule

1. Agreement by the parties 2. Cure 3. Substitution of Carriers 4. Installment Contracts 5. Commercial Impracticability 6. Destruction of Identified Goods 7. Assurance and Cooperation

Remedies for the Buyer when the seller refuses to ship the goods

1. Cancel (rescind) the contract. 2. Obtain goods that have been paid for if the seller or lessor is insolvent. 3. Sue to obtain specific performance if the goods are unique or if damages are an inadequate remedy. 4. Buy other goods (obtain cover) and recover damages from the seller. 5. Sue to obtain identified goods held by a third party (replevy goods). 6. Sue to obtain damages.

Remedies for the Seller when in possession of the goods

1. Cancel (rescind) the contract. 2. Resell the goods and sue to recover damages. 3. Sue to recover the purchase price or lease payments due. 4. Sue to recover damages for the buyer's nonacceptance of goods.

Seller's Obligation Shipment Contract

1. Place the goods into the hands of the carrier. 2. Make a contract for their transportation that is reasonable according to the nature of the goods and their value. (For example, certain types of goods need refrigeration in transit.) 3. Obtain and promptly deliver or tender to the buyer any documents necessary to enable the buyer to obtain possession of the goods from the carrier. 4. Promptly notify the buyer that shipment has been made

Remedies for the Seller the goods are in transit

1. Seller May stop deliver

Remedies for the Buyer when the seller ships non conforming goods

1. The Right to reject the Goods 2. Revoke Acceptance of the goods 3. Keep the goods and sue for damages.

Buyer demonstrates acceptance

1. The buyer or lessee indicates (by words or conduct) to the seller or lessor that the goods are conforming or that he or she will retain them in spite of their nonconformity 2. The buyer or lessee fails to reject the goods within a reasonable period of time 3. In sales contracts, the buyer will be deemed to have accepted the goods if he or she performs any act inconsistent with the seller's ownership. For instance, any use or resale of the goods—except for the limited purpose of testing or inspecting the goods—generally constitutes an acceptance

Length of time Seller has to stop delivery

1. The buyer or lessee receives the goods. 2. The carrier or the bailee acknowledges the rights of the buyer or lessee in the goods (by reshipping or holding the goods for the buyer or lessee, for example). 3. A negotiable document of title covering the goods has been properly transferred to the buyer in a sales transaction, giving the buyer ownership rights in the goods

Letter of Credit

A written instrument, usually issued by a bank on behalf of a customer or other person, in which the issuer promises to honor drafts or other demands for payment by third persons in accordance with the terms of the instrument.

Anticipatory Repudiation

An assertion or action by a party indicating that he or she will not perform an obligation that the party is contractually obligated to perform at a future time.

Place of the Delivery

Unless the parties agree differently the goods will be delivered to the buyer as follows: 1. The seller's place of business. 2. The seller's residence, if the seller has no business location 3. The location of the goods, if both parties know at the time of contracting that the goods are located somewhere other than the seller's business

Basic Duties of the Buyer under the Good Faith Provision

accept and pay for conforming goods