Ch 18 Performance and Breach of a Sales and Lease Contract

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

Basic Duties of the Seller under the Good Faith Provision

transfer and deliver conforming goods

Basic Duties of the Buyer under the Good Faith Provision

accept and pay for conforming goods

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

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 o

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 promp

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 an

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

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

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 ti

Installment Contract is breached

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

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

When do credit terms begin

the date the goods are shipped the goods are shipped


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.

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

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

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.

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 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.

Remedies for the Seller the goods are in transit

1. Seller May stop deliver

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 g

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.

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 rec

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.

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.