Day Limits

Question 1

Merchants Confirmatory Memo time limit and definition:

Answer 1

In K’s of $500 or more between merchants, if a merchant - within a reasonable time after an oral agreement has been made - send to the other merchant a written confirmation of their agreement that is sufficient under the SOF to bind the sender, then the recipient is also bound if she had reason to know of the confirmation’s content and does not object within 10 days of receipt.

Thus, the merchant who receives the signed confirmation from the other merchant will be bound by that confirmation just as if she had signed it.

Question 2

Under Article 2, when any reasonable grounds for insecurity arise with respect to the performance of the other party, the party who fears that the other party will not perform may demand, in writing, adequate assurance from the other party. How long does the other party have to respond?

Answer 2

After receipt of a justified demand, the failure to provide adequate assurance within a reasonable time not to exceed 30 days will constitute a repudiation of the contract.

Question 3

Partial-payment situations:
The buyer may also replevy undelivered goods that have been identified under the contract when:

Answer 3

i) The buyer has made a partial payment, and the seller becomes insolvent within 10 days of the buyer’s first payment (the buyer must tender full payment at the time of replevin);

or

ii) The buyer has made a partial payment, and the goods are for personal, family, or household use (the buyer must tender full payment at the time of replevin).

Question 4

Goods Delivered to an Insolvent Buyer on Credit:

If the seller discovers that the buyer has received goods on credit while insolvent, then the seller may reclaim/recapture the goods following:

Answer 4

A demand made within 10 days after the buyer’s receipt of the goods. (Note that if a buyer tenders cash, despite his insolvency, the seller may not reclaim the goods.) If a written misrepresentation of solvency was made to the seller within three months prior to the delivery of the goods, then the 10-day limitation does not apply. The seller’s right to reclaim the goods is subject to the right of a buyer in the ordinary course of business or any other good faith purchaser.

Note that as a precondition to recapture, Article 2 requires that the buyer have received the goods on credit while insolvent. If the buyer becomes insolvent after delivery, the seller may not reclaim.