Performance and Breach Under UCC

Question 1

Overview of Performance and Breach

Answer 1

If a buyer has not accepted the goods, the buyer may reject the goods.

If the buyer has accepted the goods, the buyer may revoke the acceptance.

Question 2

Acceptance

Answer 2

Acceptance occurs when:

1) the buyer signifies acceptance to the seller (requires communication);
2) the buyer fails to reject the goods within a reasonable time; or
3) the buyer acts in a manner inconsistent with the seller’s ownership interests (resells or alters the goods)

Question 3

Acceptance of Commercial Unit

Answer 3

Acceptance of a party of any commercial unit is acceptance of that entire unit (prohibited from splitting commercial units)

Commercial Unit - any unit of goods that by commercial usage is sold as a singular whole such that division would materially alter its value or character.

Question 4

Right to Reject in Single Delivery Transaction

Answer 4

In a single delivery transaction, a buyer is entitled to a perfect tender. The buyer is entitled to reject if tender fails to conform in any respect, in which case the buyer may:

1) reject the whole;
2) accept the whole; or
3) accept some and reject the rest

Question 5

Right to Reject in an Installment Contract

Answer 5

An installment contract is one which authorizes or requires the seller to deliver in multiple lots, irrespective of how the parties attempt to name it.

The buyer may reject any installment which is nonconforming if (1) the nonconformity substantially impairs the value of that installment, and (2) it cannot be cured.

Whenever a nonconformity with respect to one or more installments substantially impairs the value of the whole contract, the buyer is entitled to cancel.

Question 6

How to Effect Rejection

Answer 6

If a buyer wants to effect rejection, the buyer must provide the seller with seasonable notice of rejection

Question 7

Duties after Rejection

Answer 7

After rejection, any exercise of ownership by the buyer over the goods is wrongful.

If the buyer has taken physical possession of the goods, and the buyer doesn’t have a security interest under 2-711(3), then the buyer is under a duty to hold the goods with reasonable care.

The buyer has no further obligations with regard to goods rightfully rejected.

Question 8

2-711(3) Security Interest

Answer 8

On rightful rejection, a buyer has a security interest in goods in his possession for any payments made on the purchase price or any expenses reasonably incurred associated with the rejection. They buyer may hold such goods and resell them in a like manner as an aggrieved seller.

Question 9

Merchant’s Duties upon Rightful Rejection

Answer 9

Subject to 2-711(3), if the buyer rejects and the seller has no agent or place of business in the market of rejection, a merchant buyer is under a duty after rejection of goods in his possession to follow any reasonable instructions received from the seller. In the absence of instructions, the merchant buyer is under a duty to make reasonable efforts to resell the goods if they are perishable or threatened to decline in value.

When the buyer resells, he is entitled to repayment of expenses and commission for resell on the seller’s behalf.

In complying with this section, the buyer is held only to good faith.

Question 10

Buyer’s Right to Salvage Rejected Goods

Answer 10

If the seller has failed to provide instructions to the buyer after a reasonable time after notification of rejection the buyer may:

1) store the rejected goods;
2) reship the goods to the seller; or
3) resell the goods.

The seller has a duty to pay the expenses incurred by the buyer, and if the buyer resells the buyer is entitled to compensation as a merchant reseller would be.

NOTE - don’t have to be a merchant for this provision

Question 11

Seller’s Right to Cure before Expiration

Answer 11

Where the time for performance has not yet expired, the seller has an unencumbered right to cure, and the seller need only seasonably notify the buyer of the intent to cure.

Question 12

Seller’s Right to Cure after Expiration

Answer 12

When the time for performance has passed, the seller will have a right to cure for a reasonable time so long as at the time of tender the seller had reasonable grounds to believe the goods would be accepted with or without a money allowance.

Question 13

Buyer’s Right to Revoke

Answer 13

For the buyer to have the right to revoke his acceptance, it must be true that:

1) the nonconformities substantially impair the value of the goods to him;
2) the buyer was induced into acceptance:

– with discovery under a reasonable expectation of cure;
– without discovery due to the difficulty of discovery; or
– without discovery due to the seller’s assurances; and

3) there is no substantial alteration to the condition of the goods that was not caused by the defect itself

Question 14

Anticipatory Repudiation Definition

Answer 14

An anticipatory repudiation is an unequivocal and unambiguous manifestation of intent not to perform when performance comes due

Question 15

UCC Anticipatory Repudiation

Answer 15

If a party repudiates and the repudiation substantially impairs the value of the contract, the non-repudiating party is entitled to:

1) for a commercially reasonable time await performance;
2) resort to any remedy for breach; and
3) in either case suspend his own performance

Question 16

Demand for Adequate Assurances

Answer 16

If a party has reasonable grounds for insecurity, that party may in writing demand an adequate assurance, and until that assurance comes suspend his own performance.

Acceptance of either an improper delivery or improper payment does not prejudice a party from demanding for adequate assurances for further performances.

If a party fails to comply with a demand within a reasonable time not to exceed thirty days, the failure to comply is automatically a repudiation which substantially impairs the value of the contract.

Question 17

Retraction of Repudiation

Answer 17

A repudiating party has an unencumbered right to retract is repudiation at any point prior to one of the following four things:

1) communication of finality; or
2) a lawsuit; or
3) a material change in position by the non-repudiating party; or
4) the time for performance

Question 18

GA LEMON LAW

Answer 18

If within the first two years or 24,000 miles a consumer informs the manufacturer that a new car is nonconforming, the manufacturer or dealer is entitled to a reasonable number of attempt to repair the nonconformity.

– After a reasonable number of failed attempts, the consumer may notify the manufacturer, who is given one final repair attempt.

– If that attempt fails or the repair causes the cause to be out of service for 30 cumulative days, the consumer is eligible for a refund of the purchase price or replacement of the vehicle.