Installment Contracts

Question 1

What is an installment contract?

Answer 1

An installment contract is one which requires or authorizes the delivery of goods in separate lots to be separately accepted.

Question 2

Why is an installment K an exception to the perfect tender rule?

Answer 2

1. An installment contract is an exception to the Perfect Tender Rule (PTR).
2. Under the PTR, a buyer is allowed to reject the tender of delivery if the goods fail to conform in any respect.
3. With installment contracts, however, a buyer may reject any installment which is nonconforming if the non-conformity “substantially impairs” the value of the individual installment and can’t or won’t be cured.
4. Whenever a non-conformity “substantially impairs” the value of the whole contract, there is a breach of the whole contract.

Question 3

What must you do to reject an installment?

Answer 3

Rejection of the installment, however, may require party seeking rejection to demand assurances from Distributor pursuant to UCC §2-
609 (demand must be in writing and Distributor has 30 days to respond) for future installments.