BALW 20150 Chapter 22: Performance and Breach of Sales and Lease contracts

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University of Notre Dame
Bus Admin - Business Law
BALW 20150

Chapter 22: Performance and Breach of Sales and Lease Contracts  Obligation of good faith o Nonmerchant honesty in fact o Merchant honesty in fact AND observance of reasonable commercial standards of fair dealing in the trade (held to higher standard)  Basic obligation of seller or lessor is to transfer and deliver conforming goods o Conforming goods= goods that conform to the contract description in every way o Tender of delivery= when the seller/lessor makes conforming goods available and gives the buyer or lessee whatever notification is reasonably necessary to enable the buyer/lessee to take delivery  Fulfills the contract (counts as performance)  Must occur at reasonable hour and in reasonable manner  Normally, all goods must be tendered in a single delivery unless parties have agreed on delivery in several installments o If contract does not indicate where the goods will be delivered, then place for delivery will be one of the following:  Seller’s place of business  Seller’s residence, if seller has no business location  Location of the goods, if both parties know at time of contracting that goods are locating somewhere other than seller’s business o Delivery via carrier seller fulfills the obligation to deliver the goods through either a shipment or destination contract  Shipment contract requires seller to ship goods by carrier, rather than to delivery them at particular destination. Seller must:  Place goods into the hands of the carrier  Make a contract for their transportation that is reasonable according to nature of the goods and their value (ex. refrigeration)  Obtain and promptly deliver/tender to the buyer any documents necessary to enable the buyer to obtain possession of goods from carrier  Promptly notify the buyer that shipment has been made  Buyer can reject the goods if material loss or significant delay results from seller not completing all of above steps  Destination contract seller agrees to deliver conforming goods to the buyer at particular destination  Goods must be tendered at reasonable hour and held at buyer’s disposal for reasonable length of time  Seller must give buyer appropriate notice and any necessary documents to enable buyer to obtain delivery from carrier  Perfect tender rule= a common law rule under which seller was obligated to deliver goods that conformed with terms of contract in every detail  UCC preserves this rule  If goods or tender of delivery fails in any respect to conform to contract, buyer/lessee may accept the goods, reject the entire shipment, or accept part and reject part  If goods conform in every respect, buyer does not have right to reject the goods  Exceptions: o Agreement of the parties o Cure= the right of the seller to repair, adjust, or replace defective or nonconforming goods. Seller has right to attempt to “cure” a defect when:  Delivery is rejected b/c goods were nonconforming  Time for performance has not yet expired  Seller provides timely notice to buyer of the intention to cure  And cure can be made within the contract time for performance (once time has expired, seller can still cure if he has reasonable grounds to believe that nonconforming tender will be acceptable to buyer)  Discounted price can serve as reasonable grounds  The right to cure restricts the right of the buyer to reject goods. Must state specific reasons. o Substitution of carriers if a commercially reasonable substitute is available, subs. Performance is sufficient tender to buyer and must be used o Installment contract= single contract that requires delivery in two or more separate lots to be accepted and paid for separately  Buyer can reject installment only if nonconformity substantially impairs the value of the installment and can’t be cured  The entire installment contract is breached only when one or more nonconforming installments substantially impair the value of the WHOLE contract o Commercial impracticability  Perfect tender rule no longer applies  Seller must notify buyer as soon as practicable that there will be delay/non-delivery  Doesn’t apply to problems that could’ve been foreseen  Partial performance deliver what’s possible and buyer can either accept or reject o Destruction of identified goods  If goods were identified at time the contract was formed, parties are excused from performance  If goods are only partially destroyed, buyer can treat contract as void or accept damaged gods with reduction in contract price o Assurance and cooperation  Right of assurance if one party has reasonable grounds to believe that other party will not perform, first party can in writing “demand adequate assurance of due performance” from other party  Until assurance is received, first party may suspend performance without liability  Failure to respond within reasonable time may be treated as repudiation of contract  Duty of cooperation if performance of one party depends on cooperation of other and one is not cooperating, other party can suspend performance without liability and hold uncooperative party I breach or proceed to perform contract  Basic obligation of buyer or lessee is to accept and pay for conforming goods o Payment  Buyer must make payment at time and place the goods are received  Sale on credit buyer must pay according to specified credit terms, credit period usually begins on date of shipment  Can be made by any means agreed on between parties  If seller demands cash, must give buyer reasonable time to obtain it o Buyer/lessee has absolute right to inspect the goods before making payment  If goods are not as ordered, buyer has no duty to pay  Opportunity for inspection is a condition precedent to right of seller to enforce payment  Inspection can take place at any reasonable place and time  Buyer bears costs of inspecting the goods but can recover costs from seller if goods do not conform and are rejected o Acceptance:  Buyer indicates by words or conduct to seller that the goods are conforming or that they’ll retain in spite of nonconformity  Buyer fails to reject goods within reasonable time  Buyer deemed to have accepted goods if he performs any act inconsistent with seller’s ownership (ex. use or resale of goods) o Partial acceptance can’t accept less than single commercial unit  Summary of obligations on pg. 425  Anticipatory repudiation: o Non-breaching party can:  Treat repudiation as final breach by pursuing remedy  Wait to see if repudiating party will decide to honor contract o Breaching party can retract repudiation unless other party has canceled/materially changed position or otherwise indicated that repudiation is final  Remedies of seller/lessor (breach by buyer) o W
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