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PERFORMANCE OF CONTRACT OF SALE AN INTRODUCTIONSeller 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 as set out below.
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1: Good Faith RequirementGood Faith is the foundation of every
UCC commercial contract.Good faith means honesty in fact.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.
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2: Seller-Lessor ObligationsSeller has a duty to tender delivery
of conforming goods.Tender means delivery to agreed place:With
reasonable notice.At a reasonable hour.In a reasonable
manner.Exactly, unless otherwise agreed.
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Place of Delivery--Non-CarriersBuyer picks up at Sellers place
of business or, if Buyer has no place of business, then Buyers
residence.If both parties know the goods are elsewhere (at a
warehouse), then place of delivery is where the goods are.
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Place of Delivery--CarriersShipment contracts. Seller has a duty
to:Put goods into hands of independent carrier.Make contract for
transportation.Obtain and promptly deliver or tender to the Buyer
any documents necessary.Promptly notify Buyer that shipment has
been made.Destination contracts. Seller has duty to:Tender the
goods at a reasonable hour and hold conforming goods at the Buyers
disposal for a reasonable period of time.
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The Perfect Tender Rule If goods, or tender of delivery, fail in
any respect to conform to the contract, the Buyer has the right to:
Accept the goods; Reject the entire shipment; or Accept part and
reject part.
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3: Buyer-Lessee ObligationsFurnish facilities reasonably suited
for receipt of the goods.Make payment at the time and place the
Buyer receives the goods.Credit has to be prearranged.Credit period
begins on the date of shipment.Pay with cash, credit card, check.
But if Seller asks for cash, Seller has to give Buyer time to get
cash.
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Buyers Obligations Buyer has right to inspection before paying:
Costs of inspection borne by Buyer.However, C.O.D., C.I.F. and
C&F give Buyer no right to inspect.
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Acceptance Buyer can accept goods:By words or conduct.If Buyer
had reasonable amount of time and failed to reject.Buyer performs
an act which indicates he thinks he is the owner.Partial
Acceptance.
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Revocation of AcceptanceNotify Seller of breach.Revoke only if
substantial nonconformity; and Buyer accepted on the reasonable
assumption that the Seller would cure the non-conformity OR Buyer
did not discover the nonconformity because defect was latent or
hard to discover.
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4: Anticipatory RepudiationParty communicates he will not
perform by time of contract performance.Nonbreaching party may
suspend performance and:Treat the A.R. as material breach and
pursue a remedy; orWait a reasonable time.
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5: International Contracts and Letters of CreditParties.Account:
Buyer.Issuer: Bank.Beneficiary: Seller.Issuer is bound to pay the
beneficiary who has complied with the terms and conditions of the
letter of credit, usually requiring a bill of lading to the issuer
to prove shipment has been made.
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Agreement of the Parties Parties agree that some defective goods
will be acceptable.Parties agree that defective goods can be
replaced or repaired within a certain time.
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Sellers CureSeller has the right to Cure (ship conforming goods
to Buyer) if:Agreed time of performance has not yet expired; orIf
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.
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Substitution of CarriersIf a carrier becomes impracticable or
unavailable through no fault of either party, a commercially
reasonable substitute is acceptable.*Return
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Commercial ImpracticabilityOccurrence of an unforeseen
contingency that makes performance impracticable.Nonoccurrence was
a basic assumption on which the contract was made.If only partial
impracticability, Seller must allocate what he/she has.Case 21.1:
Maple Farms v. City School District of Elmira (1974).
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Installment ContractsInstallment Contracts can be rejected
if:installment is substantially non-conforming and cant be
cured.non-conforming installment substantially impairs the entire
contract.
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Destruction of GoodsIf no fault of either party and it
occursBefore risk passes to Buyer then Both Seller and Buyer are
excused from performance.
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Partial PerformanceSometimes unforeseen event only partially
affects Sellers capacity to perform.In that event, Seller has duty
to reasonably allocate any remaining production capacity to
fulfilling contractual performance.Buyer has the right to
reject.
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