Chapter 15, Performance & Cure in Sales Contracts
______ refers to any general practice of method of performance that is specific to a particular trade or industry.
Usage of trade
If the time for the seller's performance has not expired, the seller may cure by (1) ______ and (2) ______.
giving notice of her intent to cure tendering conforming goods to replace rejected goods
If Megan Manufacturer has provided perfect tender to the buyer Rachel Retailer, Rachel's obligation is _______ Megan subject to Rachel's right to inspect.
to pay
The buyer's primary obligation is triggered when _______.
the seller tenders delivery
Exceptions to Perfect Tender
Agreement of parties: agree that some defective goods will be acceptable "Cure": parties agree that defective goods can be replaced/repaired within a certain time
Acceptance
Buyer can accept goods: - by words/conduct - buyer had reasonable amount of time and failed to reject - buyer performs on act which indicates he thinks he is owner Partial acceptance.
Right to inspect
Buyer has right to inspection before paying: costs of inspection are borne by buyer
"Place of Delivery": non-carriers
Buyer picks up at seller's place of business, or if seller has no place of business, then seller's residence. If both parties know goods are elsewhere (at warehouse), then place of delivery is where goods are.
Exceptions to installment contracts
Can be rejected if: - installment is substantially non-conforming and can't be cured - non-conforming installment substantially impairs entire K
_______ is similar to course of performance in that both refer to patterns of performance by the parties, except that _______ refers to how the parties acted in the past
Course of dealing
Jose Altuve and Carlos Correa both live in Houston. In Houston, Altuve contracts to sell Correa ten (10) used cars, which both know are located in a Detroit warehouse. If noting more is specified in the contract, the place of delivery for the cars is:
Detroit
Obligations of the buyer/lessee
Furnish facilities reasonably suited for receipt of goods. Make payment at time and place buyer receives goods. Credit has to be prearranged: credit period begins on date of shipment Pay with cash, credit card, check: but if seller asks for cash, seller has to give buyer time to get cash
Suppose on April 1 Tom contracts with Joe to deliver 100 widgets at $10 per unit to be delivered no later than May 1. Suppose Tom delivers the 100 widgets on April 25, but Joe rejects the goods as nonconforming and notifies Joe. What options does Tom have at this point?
Give notice of intent to cure. Tender conforming goods on or before May 1.
_______ is defined in the UCC as "honesty in fact in the conduct or transaction.
Good faith
Performance obligations
Good faith is the foundation of every UCC commercial K. * Good faith means honesty in facts * For a merchant, it means honesty in fact and observance of reasonable commercial standards of fair dealing in the trade. Merchants are held to a higher standard of care than non-merchants.
Exception to substitution of carriers
If a carrier becomes impracticable or unavailable through no fault of either party, a commercially reasonable substitute is acceptable
The Perfect Tender Rule
If goods, or tender of delivery, fail in any respect to conform to the K, the buyer has the right to: - accept goods - reject entire shipment - accept and reject part
Exceptions to destruction of goods
If no fault of either party and it occurs before risk passes to buyer, then both seller and buyer are excused from performance.
In the _______, Inc. v. City School District of Elmira case, the court ruled that an unexpected increase in prices was not sufficient to meet the standard of commercial _______.
Maple Farms; impracticability
_______ have the duty to act in a(n) _______ manner by observing industry standards and practices that may be unique to a particular industry or field.
Merchants; Commercially reasonable
Revocation of acceptance
Notify seller of breach. Revoke only if substantial nonconformity and (1) buyer accepted on reasonable assumption that seller would cure non-conformity OR (2) buyer did not discover the nonconformity because defect was latent/hard to discover.
Exceptions to commercial impracticability
Occurrence of an unforeseen contingency that makes performance impracticable. Nonoccurrence was a basic assumption on which the K was made. If only partial impracticability, seller must allocate what they have.
Anticipatory repudiation
Party says he will not perform on time. Nonbreaching party may suspend performance and (1) treat the A.R. as material breach and purse a remedy OR (2) wait a reasonable time.
Suppose Tom ships Joe 1,000 widgets in 10 boxes, 100 widgets each box. When the delivery truck arrives, three of the boxes are very damaged. If Joe wants to accept at least the 7 boxes, what are his rights?
Reject the entire shipment. Accept 7 boxes and reject the rest. Accept all the boxes as is.
Exceptions to assurance and cooperation
Right of assurance (in writing) - until received, other party has right to 'suspend' performance/delivery Duty of cooperation: if a party is not cooperating, other party has right to suspend performance.
Obligations of the Seller-Lessor
Seller has a duty to "tender" delivery of "conforming goods." Tender to "place of delivery": - with reasonable notice - at reasonable hour - in reasonable manner - exactly, unless otherwise agreed
Delivery via Carriers: shipment contracts
Seller has a duty to: - put goods into hands of independent carrier - make K for transportation - obtain and promptly deliver/tender to buyer any documents necessary - promptly notify buyer that shipment has been made
Delivery via Carriers: destination contracts
Seller has duty to: - tender goods at a reasonable hour and hold conforming goods at buyer's disposal for a reasonable period of time. reasonable notice and documents.
Exception to Seller's Cure
Seller has right to "cure" (ship conforming goods to buyer) if: - agreed time of performance has not yet expired - if seller had reasonable grounds to expect that buyer would accept non-conforming goods, i.e., these goods are better than goods ordered, or buyer has accepted non-conforming goods in the past
Review
Seller must transfer and deliver conforming goods. Buyer must accept and pay for conforming goods. In the absence of an agreement between seller and buyer, UCC article 2 controls.
If Megan Manufacturer ships nonconforming goods to buyer Rachel Retailer, Rachel may: _______ or _______.
accept or reject the entire shipment accept part and reject the rest
Once the buyer has _______ the goods, the buyer must _______ in accordance with how the parties have negotiated and agreed on the details of payments.
accepted; pay for them
The UCC applies the commercial impracticability rule when the delivery or nondelivery of goods has been made impracticable by the occurrence of: _______ and _______.
an unforeseeable event the event affects the basic assumption of the contract
The UCC uses a general reasonableness requirement to govern the delivery process which means the good must be delivered: (1) _______, (2) _______, and (3) _______.
at a reasonable hour in one shipment in a reasonable manner
Conforming goods simply means the goods _______.
bargained for in an agreement
Suppose Samantha Seller ships 100 widgets to Brianna Buyer. Under the UCC, after inspection of the goods, if Brianna properly rejects the goods, she may also _______ and pursue any appropriate legal remedies against Samantha Seller.
cancel the balance of the contract
The UCC applies the _______ rule when the nondelivery of goods has been made impracticable by the occurrence of an unanticipated event, and the unanticipated event directly affects a basic assumption of the contract.
commercial impracticability
In every commercial transaction, the UCC has a good faith provision that imposes duties of _______ and _______ the bedrock of any sales contract.
commercial reasonableness good faith
Fundamentally, the seller's obligation is to transfer and deliver _______ goods to the buyer.
conforming
Suppose Tom (seller) and Joe (buyer) have a contract that calls for "top shelf scotch" to be delivered in five installments over the course of a year. The _________ between the parties would be based on the quality of the first installment of scotch delivered by Tom and accepted by Joe.
course of performance
The _______ is a method to show what the parties intended through their own actions in performing the specific contract in question.
course of performance
Once the time contemplated for performance has expired, the seller's right to _______ also expires.
cure
Energy Products Corporation and First Response Preparedness enter into a contract for a sale of generators. Under a destination contract, the seller must
deliver the goods to a particular destination.
In the absence of an agreement, the UCC provides that the buyer must make _______ at the time and place that she has _______ the goods.
full payment; received
In the Sons of Thunder v. Borden case, the court held that a buyer breached the duty of _______ by willfully trying to circumvent its contractual obligations to a seller that made a significant investment to carry out its obligations.
good faith
Replevin
goods may be returned to their owner pending outcome of an action to determine rights of parties
Commercial _______ is a ______ doctrine as demonstrated in the Maple Farms v. City School District of Elmira case.
impracticability; narrow
The UCC provides that if delivery and billing are done in two or more separate lots for cash flow or other business reasons the parties may do so via the use of a(n) _______ contract.
installment
If the goods are to be picked up, the goods must be _______ to allow the buyer to take possession.
made available at a reasonable time
Suppose the UCC governs the transaction between Sam Seller and Bob Buyer, and Bob orders 1,000 widgets from Sam. If the widgets are acceptable when delivered, Bob _______.
must make full payment for the goods
If Sammy Seller has shipped _______ parts to to Megan Manufacturer and Megan accepts them, the UCC allows Megan to revoke her acceptance only if the _______ the value of the goods.
nonconforming; nonconformity substantially impairs
Sun Power, Inc. sells solar power cells and panels to commercial dealers in the Southwest. With regard to the UCC's good faith requirement, Sun Power can
not disclaim in.
Suppose Sam Seller ships 100 widgets to Bob Buyer. Under the UCC, after inspection of the goods, Bob may: (1)_______, or (2)________, or (3)_______.
notify Sam of rejection notify Sam of acceptance do nothing
Course of dealings involves _______ which provides a reference point for what the parties reasonably expected in terms of performance on a new contract.
past dealings
If Sammy Seller shipped goods to Megan Manufacturer, Megan's acceptance of the nonconforming goods triggers her obligation to _______.
pay for the nonconforming goods
Under the UCC, the _______ rule requires the seller to deliver the goods in a manner that matches the contract terms in every respect.
perfect tender
Great Days Products, Inc. and Hot Springs Spas Store enter into a contract for a sale of hot tubs. Under a shipment contract, the seller must
place the goods into the hands of a carrier.
Suppose Sam Seller ships 100 widgets to Bob Buyer. Unless the parties have agreed otherwise, under the UCC Bob has a(n) _______ time period to _______ the goods to be sure they conform to the contract.
reasonable; inspect
The seller may have a right to cure after the time for performance has passed, but she must ________.
reasonably notify the buyer of her intent to cure
Under the UCC perfect tender rule, if the seller fails to achieve perfect tender, the buyer has the following options: _______, _______, or _______.
reject the entire shipment accept partial shipment and reject the rest accept the entire shipment
If the seller has delivered goods and the buyer rejects them under the perfect tender rule, the seller has the right to: _______ or _______ the rejected goods as long as the time period for performance has not expired.
replace repair
The seller has a duty under the UCC to perfectly _______ the goods to the buyer.
tender
Suppose Marvin Manufacturer ships 1,500 widgets to Sally Supplier via an installment contract. After arrival of the widgets, if Sally discovers the widgets in this installment are nonconforming, she has the right under the UCC to reject the entire installment if _______, and _______.
the nonconformity substantially impairs the value of the entire installment the nonconformity cannot be cured
The right to cure may exist after the time period for performance has come due, if ________.
the seller believes the nonconforming goods will be acceptable
On July 10, Pet Supply Store orders fifty (50) small dog collars from Quality Collars, Inc. to be delivered before July 15. On July 13, Quality Collars tenders fifty (50) large dog collars. Pet Supply rejects the shipment. Quality Collars has
until July 15 to cure.
Tom manufactures widgets that conform to NASCAR specifications for widgets. If Joe buys 1,000 of Tom's widgets his contractual expectations would be based on ________.
usage of trade
