UCC Article 2 Rules

Question 1

§2-102. – Scope; Certain Security and Other Transactions Excluded from This Article.

Answer 1

§2-102. – Unless the context otherwise requires, this Article applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction nor does this Article impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers.

Question 2

§2-103(1)(c). – “Receipt”

Answer 2

§2-103. – Scope; Certain Security and Other Transactions Excluded from This Article.

(1) In this Article unless the context otherwise requires:
(c) “Receipt” of goods means taking physical possession of them.

Question 3

§2-103(1)(a). “Buyer”

Answer 3

§2-103. – Scope; Certain Security and Other Transactions Excluded from This Article.

(1) In this Article unless the context otherwise requires:
(a) “Buyer” means a person who buys or contracts to buy goods.

Question 4

§2-103(1)(b). – “Good faith”

Answer 4

§2-103. – Scope

(1) In this Article unless the context otherwise requires:
(b) “Good faith” in the case of a merchant means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.

Question 5

§2-103(1)(d). – “Seller”

Answer 5

§2-103. – Scope; Certain Security and Other Transactions Excluded from This Article.

(1) In this Article unless the context otherwise requires:
(d) “Seller” means a person who sells or contracts to sell goods.

Question 6

`§2-104(1) – “Merchant”

Answer 6

§2-104. – “Merchant” 1. “Merchant” means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.

Question 7

§2-104 – “Financing Agency”

Answer 7

§2-104. – Definition: “Financing Agency” 2. “Financing agency” means a bank, finance company or other person who in the ordinary course of business makes advances against goods or documents of title or who by arrangement with either the seller or the buyer intervenes in ordinary course to make or collect payment due or claimed under the contract for sale, as by purchasing or paying the seller’s draft or making advances against it or by merely taking it for collection whether or not documents of title accompany the draft. “Financing agency” includes also a bank or other person who similarly intervenes between persons who are in the position of seller and buyer in respect to the goods (Section 2-707).

Question 8

§2-104 – “Between Merchants”

Answer 8

§2-104. – Definition: “Between Merchants” 3. “Between merchants” means in any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants

Question 9

§2-105. Definitions: Transferability; “Goods”; “Future” Goods”

Answer 9

§2-105. Definitions: “Goods” (1) “Goods” means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Article 8) and things in action. “Goods” also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (Section 2-107). (2) Goods must be both existing and identified before any interest in them can pass. Goods which are not both existing and identified are “future” goods. A purported present sale of future goods or of any interest therein operates as a contract to sell. (3) There may be a sale of a part interest in existing identified goods. (4) An undivided share in an identified bulk of fungible goods is sufficiently identified to be sold although the quantity of the bulk is not determined. Any agreed proportion of such a bulk or any quantity thereof agreed upon by number, weight or other measure may to the extent of the seller’s interest in the bulk be sold to the buyer who then becomes an owner in common.

Question 10

§2-105. Definitions: “Lot”

Answer 10

§2-105. Definitions: “Lot” (5) “Lot” means a parcel or a single article which is the subject matter of a separate sale or delivery, whether or not it is sufficient to perform the contract.

Question 11

§2-105. Definitions: “Commerical Unit”

Answer 11

§2-105. Definitions: “Commerical Unit” (6) “Commercial unit” means such a unit of goods as by commercial usage is a single whole for purposes of sale and division of which materially impairs its character or value on the market or in use. A commercial unit may be a single article (as a machine) or a set of articles (as a suite of furniture or an assortment of sizes) or a quantity (as a bale, gross, or carload) or any other unit treated in use or in the relevant market as a single whole.

Question 12

§2-106. Definitions: “Contract”; “Agreement”; “Contract for Sale”; “Sale”; “Present Sale”

Answer 12

§2-106. Definitions: “Contract”; “Agreement”; “Contract for Sale”; “Sale”; “Present Sale” (1) In this Article unless the context otherwise requires “contract” and “agreement” are limited to those relating to the present or future sale of goods. “Contract for sale” includes both a present sale of goods and a contract to sell goods at a future time. A “sale” consists in the passing of title from the seller to the buyer for a price (Section 2-401). A “present sale” means a sale which is accomplished by the making of the contract.

Question 13

§2-106. Definitions: “Termination”

Answer 13

§2-106. Definitions: “Termination” (3) “Termination” occurs when either party pursuant to a power created by agreement or law puts an end to the contract otherwise than for its breach. On “termination” all obligations which are still executory on both sides are discharged but any right based on prior breach or performance survives.

Question 14

§2-106. Definitions: “Cancellation”

Answer 14

§2-106. Definitions: “Cancellation” (1) “Cancellation” occurs when either party puts an end to the contract for breach by the other and its effect is the same as that of “termination” except that the cancelling party also retains any remedy for breach of the whole contract or any unperformed balance.

Question 15

§2-107. Goods to Be Severed from Realty: Recording.

Answer 15

§2-107. Goods to Be Severed from Realty: Recording. (1) A contract for the sale of minerals or the like (including oil and gas) or a structure or its materials to be removed from realty is a contract for the sale of goods within this Article if they are to be severed by the seller but until severance a purported present sale thereof which is not effective as a transfer of an interest in land is effective only as a contract to sell. (2) A contract for the sale apart from the land of growing crops or other things attached to realty and capable of severance without material harm thereto but not described in subsection (1) or of timber to be cut is a contract for the sale of goods within this Article whether the subject matter is to be severed by the buyer or by the seller even though it forms part of the realty at the time of contracting, and the parties can by identification effect a present sale before severance. (3) The provisions of this section are subject to any third party rights provided by the law relating to realty records, and the contract for sale may be executed and recorded as a document transferring an interest in land and shall then constitute notice to third parties of the buyer’s rights under the contract for sale.

Question 16

§2-201. Formal Requirements; Statute of Frauds.

Answer 16

§2-201. Formal Requirements; Statute of Frauds. (1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing. (2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received. (3) A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable i. if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement; or ii. if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or iii. with respect to goods for which payment has been made and accepted or which have been received and accepted (Sec. 2-606).

Question 17

§2-202. Final Written Expression: Parol or Extrinsic Evidence.

Answer 17

§2-202. Final Written Expression: Parol or Extrinsic Evidence. Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented a) by course of performance, course of dealing, or usage of trade (Section 1-303); and b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.

Question 18

§2-205. Firm Offers.

Answer 18

§2-205. Firm Offers. An offer by a merchant to buy or sell goods in a signed writing which by its terms give assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

Question 19

§2-206. Offer and Acceptance in Formation of K.

Answer 19

§2-206. Offer and Acceptance in Formation of K. (1) Unless otherwise unambiguously indicated by the language or circumstances iv. an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances; v. an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer. (2) Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.

Question 20

§2-207. Additional Terms in Acceptance or Confirmation.

Answer 20

§2-207. Additional Terms in Acceptance or Confirmation. 1. A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms. 2. The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: a. the offer expressly limits acceptance to the terms of the offer; b. they materially alter it; or c. notification of objection to them has already been given or is given within a reasonable time after notice of them is received. 3. Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.

Question 21

§2-301. General Obligations of Parties.

Answer 21

§2-301. General Obligations of Parties. The obligation of the seller is to transfer and deliver and that of the buyer is to accept and pay in accordance with the contract.

Question 22

§2-302. Unconscionable Contract or Clause.

Answer 22

§2-302. Unconscionable Contract or Clause. (1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result. (2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.

Question 23

§2-305. Open Price Term.

Answer 23

§2-305. Open Price Term. (1) The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if (a) nothing is said as to price; or (b) the price is left to be agreed by the parties and they fail to agree; or (c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded. (2) A price to be fixed by the seller or by the buyer means a price for him to fix in good faith. (3) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party the other may at his option treat the contract as cancelled or himself fix a reasonable price. (4) Where, however, the parties intend not to be bound unless the price be fixed or agreed and it is not fixed or agreed there is no contract. In such a case the buyer must return any goods already received or if unable so to do must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account.

Question 24

c§2-312. Warranty of Title and Against Infringement; Buyer’s Obligation Infringement.

Answer 24

§2-312. Warranty of Title and Against Infringement; Buyer’s Obligation Infringement. 1) Subject to subsection (2) there is in a contract for sale a warranty by the seller that a. the title conveyed shall be good, and its transfer rightful; and b. the goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge. 2) A warranty under subsection (1) will be excluded or modified only by specific language or by circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third person may have. 3) Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications.

Question 25

§2-313. Express Warranties by Affirmation, Promise, Description, Sample.

Answer 25

§2-313. Express Warranties by Affirmation, Promise, Description, Sample. 1) Express warranties by the seller are created as follows: a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise. b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description. c) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model. 2) It is not necessary to the creation of an express warranty that the seller use formal words such as “warrant” or “guarantee” or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller’s opinion or commendation of the goods does not create a warranty.

Question 26

§2-314. Implied Warranty - Usage of Trade.

Answer 26

§2-314. Implied Warranty: Merchantability; Usage of Trade. 1) Unless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale. (2) Merchantability of Goods 3) Unless excluded or modified (Section 2-316) other implied warranties may arise from course of dealing or usage of trade.

Question 27

§2-314. Implied Warranty: Merchantability

Answer 27

2) Goods to be merchantable must be at least such as a) pass without objection in the trade under the contract description; and b) in the case of fungible goods, are of fair average quality within the description; and c) are fit for the ordinary purposes for which such goods are used; and d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and e) are adequately contained, packaged, and labeled as the agreement may require; and f) conform to the promises or affirmations of fact made on the container or label if any.

Question 28

§2-315. Implied Warranty: Fitness for Particular Purpose.

Answer 28

§2-315. Implied Warranty: Fitness for Particular Purpose. Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.

Question 29

§2-316. Exclusion or Modification of Warranties.

Answer 29

§2-316. Exclusion or Modification of Warranties. 1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this Article on parol or extrinsic evidence (Section 2-202) negation or limitation is inoperative to the extent that such construction is unreasonable. 2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that “There are no warranties which extend beyond the description on the face hereof.” 3) Notwithstanding subsection (2) a) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like “as is”, “with all faults” or other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty; and b) when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and c) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade. 4) Remedies for breach of warranty can be limited in accordance with the provisions of this Article on liquidation or limitation of damages and on contractual modification of remedy (Sections 2-718 and 2-719).

Question 30

§2-319. F.O.B. and F.A.S. Terms.

Answer 30

§2-319. F.O.B. and F.A.S. Terms. (1) Unless otherwise agreed the term F.O.B. (which means “free on board”) at a named place, even though used only in connection with the stated price, is a delivery term under which a. when the term is F.O.B. the place of shipment, the seller must at that place ship the goods in the manner provided in this Article (Section 2-504) and bear the expense and risk of putting them into the possession of the carrier; or b. when the term is F.O.B. the place of destination, the seller must at his own expense and risk transport the goods to that place and there tender delivery of them in the manner provided in this Article (Section 2-503); c. when under either (a) or (b) the term is also F.O.B. vessel, car or other vehicle, the seller must in addition at his own expense and risk load the goods on board. If the term is F.O.B. vessel the buyer must name the vessel and in an appropriate case the seller must comply with the provisions of this Article on the form of bill of lading (Section 2-323). (2) Unless otherwise agreed the term F.A.S. (“free alongside”) vessel at a named port, even though used only in connection with the stated price, is a delivery term under which the seller must: a. at his own expense and risk deliver the goods alongside the vessel in the manner usual in that port or on a dock designated and provided by the buyer; and b. obtain and tender a receipt for the goods in exchange for which the carrier is under a duty to issue a bill of lading. (3) Unless otherwise agreed in any case falling within subsection (1)(a) or (c) or subsection (2) the buyer must seasonably give any needed instructions for making delivery, including when the term is F.A.S. or F.O.B. the loading berth of the vessel and in an appropriate case its name and sailing date. The seller may treat the failure of needed instructions as a failure of cooperation under this Article (Section 2-311). He may also at his option move the goods in any reasonable manner preparatory to delivery or shipment. (4) Under the term F.O.B. vessel or F.A.S. unless otherwise agreed the buyer must make payment against tender of the required documents and the seller may not tender nor the buyer demand delivery of the goods in substitution for the documents.

Question 31

§2-320. C.I.F. and C. & F. Terms.

Answer 31

§2-320. C.I.F. and C. & F. Terms. (1) The term C.I.F. means that the price includes in a lump sum the cost of the goods and the insurance and freight to the named destination. The term C. & F. or C.F. means that the price so includes cost and freight to the named destination. (2) Unless otherwise agreed and even though used only in connection with the stated price and destination, the term C.I.F. destination or its equivalent requires the seller at his own expense and risk to a. put the goods into the possession of a carrier at the port for shipment and obtain a negotiable bill or bills of lading covering the entire transportation to the named destination; and b. load the goods and obtain a receipt from the carrier (which may be contained in the bill of lading) showing that the freight has been paid or provided for; and c. obtain a policy or certificate of insurance, including any war risk insurance, of a kind and on terms then current at the port of shipment in the usual amount, in the currency of the contract, shown to cover the same goods covered by the bill of lading and providing for payment of loss to the order of the buyer or for the account of whom it may concern; but the seller may add to the price the amount of the premium for any such war risk insurance; and d. prepare an invoice of the goods and procure any other documents required to effect shipment or to comply with the contract; and e. forward and tender with commercial promptness all the documents in due form and with any indorsement necessary to perfect the buyer’s rights. (3) Unless otherwise agreed the term C. & F. or its equivalent has the same effect and imposes upon the seller the same obligations and risks as a C.I.F. term except the obligation as to insurance. (4) Under the term C.I.F. or C. & F. unless otherwise agreed the buyer must make payment against tender of the required documents and the seller may not tender nor the buyer demand delivery of the goods in substitution for the documents.

Question 32

§2-322. Delivery “Ex-Ship”

Answer 32

§2-322. Delivery “Ex-Ship” 1) Unless otherwise agreed a term for delivery of goods “ex-ship” (which means from the carrying vessel) or in equivalent language is not restricted to a particular ship and requires delivery from a ship which has reached a place at the named port of destination where goods of the kind are usually discharged. 2) Under such a term unless otherwise agreed (1) the seller must discharge all liens arising out of the carriage and furnish the buyer with a direction which puts the carrier under a duty to deliver the goods; and (2) the risk of loss does not pass to the buyer until the goods leave the ship’s tackle or are otherwise properly unloaded.

Question 33

§2-403. Power to Transfer; Good Faith Purchase of Goods

Answer 33

§2-403. Power to Transfer; Good Faith Purchase of Goods 1) A purchaser of goods acquires all title which his transferor had or had power to transfer except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased. A person with voidable title has power to transfer a good title to a good faith purchaser for value. When goods have been delivered under a transaction of purchase the purchaser has such power even though a) the transferor was deceived as to the identity of the purchaser, or b) the delivery was in exchange for a check which is later dishonored, or c) it was agreed that the transaction was to be a “cash sale”, or d) the delivery was procured through fraud punishable as larcenous under the criminal law. 2) Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business

Question 34

§2-403. “Entrusting”

Answer 34

§2-403. “Entrusting” 3) “Entrusting” includes any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the possessor’s disposition of the goods have been such as to be larcenous under the criminal law.

Question 35

§2-503(1). Seller’s Tender of Delivery.

Answer 35

§2-503. Manner of Seller’s Tender of Delivery. 1) Tender of delivery requires that the seller put and hold conforming goods at the buyer’s disposition and give the buyer any notification reasonably necessary to enable him to take delivery. The manner, time and place for tender are determined by the agreement and this Article, and in particular (1) tender must be at a reasonable hour, and if it is of goods they must be kept available for the period reasonably necessary to enable the buyer to take possession; but (2) unless otherwise agreed the buyer must furnish facilities reasonably suited to the receipt of the goods

Question 36

§2-503. Manner of Seller’s Tender of Delivery.

Answer 36

§2-503. Manner of Seller’s Tender of Delivery. 2) Where the case is within the next section respecting shipment tender requires that the seller comply with its provisions. 3) Where the seller is required to deliver at a particular destination tender requires that he comply with subsection (1) and also in any appropriate case tender documents as described in subsections (4) and (5) of this section. 4) Where goods are in the possession of a bailee and are to be delivered without being moved (1) tender requires that the seller either tender a negotiable document of title covering such goods or procure acknowledgment by the bailee of the buyer’s right to possession of the goods; but (2) tender to the buyer of a non-negotiable document of title or of a written direction to the bailee to deliver is sufficient tender unless the buyer seasonably objects, and receipt by the bailee of notification of the buyer’s rights fixes those rights as against the bailee and all third persons; but risk of loss of the goods and of any failure by the bailee to honor the non-negotiable document of title or to obey the direction remains on the seller until the buyer has had a reasonable time to present the document or direction, and a refusal by the bailee to honor the document or to obey the direction defeats the tender. 5) Where the contract requires the seller to deliver documents (1) he must tender all such documents in correct form, except as provided in this Article with respect to bills of lading in a set (subsection (2) of Section 2-323); and (2) tender through customary banking channels is sufficient and dishonor of a draft accompanying the documents constitutes non-acceptance or rejection.

Question 37

§2-504. Shipment by Seller.

Answer 37

§2-504. Shipment by Seller. Where the seller is required or authorized to send the goods to the buyer and the contract does not require him to deliver them at a particular destination, then unless otherwise agreed he must a) put the goods in the possession of such a carrier and make such a contract for their transportation as may be reasonable having regard to the nature of the goods and other circumstances of the case; and b) obtain and promptly deliver or tender in due form any document necessary to enable the buyer to obtain possession of the goods or otherwise required by the agreement or by usage of trade; and c) promptly notify the buyer of the shipment. Failure to notify the buyer under paragraph (c) or to make a proper contract under paragraph (a) is a ground for rejection only if material delay or loss ensues.

Question 38

§2-508. Cure by Seller of Improper Tender or Delivery; Replacement.

Answer 38

§2-508. Cure by Seller of Improper Tender or Delivery; Replacement. (1) Where any tender or delivery by the seller is rejected because non-conforming and the time for performance has not yet expired, the seller may seasonably notify the buyer of his intention to cure and may then within the contract time make a conforming delivery. (2) Where the buyer rejects a non-conforming tender which the seller had reasonable grounds to believe would be acceptable with or without money allowance the seller may if he seasonably notifies the buyer have a further reasonable time to substitute a conforming tender.

Question 39

§2-509. Risk of Loss in the Absence of Breach.

Answer 39

§2-509. Risk of Loss in the Absence of Breach. (1) Where the contract requires or authorizes the seller to ship the goods by carrier a. if it does not require him to deliver them at a particular destination, the risk of loss passes to the buyer when the goods are duly delivered to the carrier even though the shipment is under reservation (Section 2-505); but b. if it does require him to deliver them at a particular destination and the goods are there duly tendered while in the possession of the carrier, the risk of loss passes to the buyer when the goods are there duly so tendered as to enable the buyer to take delivery. (2) Where the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the buyer a. on his receipt of a negotiable document of title covering the goods; or b. on acknowledgment by the bailee of the buyer’s right to possession of the goods; or c. after his receipt of a non-negotiable document of title or other written direction to deliver, as provided in subsection (4)(b) of Section 2-503. (3) In any case not within subsection (1) or (2), the risk of loss passes to the buyer on his receipt of the goods if the seller is a merchant; otherwise the risk passes to the buyer on tender of delivery. (4) The provisions of this section are subject to contrary agreement of the parties and to the provisions of this Article on sale on approval (Section 2-327) and on effect of breach on risk of loss (Section 2-510).

Question 40

§2-601. Buyer’s Rights on Improper Delivery.

Answer 40

§2-601. Buyer’s Rights on Improper Delivery. Subject to the provisions of this Article on breach in installment contracts (Section 2-612) and unless otherwise agreed under the sections on contractual limitations of remedy (Sections 2-718 and 2-719), if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may a) reject the whole; or b) accept the whole; or c) accept any commercial unit or units and reject the rest.

Question 41

§2-602. Manner and Effect of Rightful Rejection.

Answer 41

§2-602. Manner and Effect of Rightful Rejection. (1) Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller. (2) Subject to the provisions of the two following sections on rejected goods (Sections 2-603 and 2-604), (a) after rejection any exercise of ownership by the buyer with respect to any commercial unit is wrongful as against the seller; and (b) if the buyer has before rejection taken physical possession of goods in which he does not have a security interest under the provisions of this Article (subsection (3) of Section 2-711), he is under a duty after rejection to hold them with reasonable care at the seller’s disposition for a time sufficient to permit the seller to remove them; but (c) the buyer has no further obligations with regard to goods rightfully rejected. (3) The seller’s rights with respect to goods wrongfully rejected are governed by the provisions of this Article on Seller’s remedies in general (Section 2-703).

Question 42

§2-606. What Constitutes Acceptance of Goods.

Answer 42

§2-606. What Constitutes Acceptance of Goods. (1) Acceptance of goods occurs when the buyer (a) after a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that he will take or retain them in spite of their non-conformity; or (b) fails to make an effective rejection (subsection (1) of Section 2-602), but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them; or (c) does any act inconsistent with the seller’s ownership; but if such act is wrongful as against the seller it is an acceptance only if ratified by him. (2) Acceptance of a part of any commercial unit is acceptance of that entire unit.

Question 43

§2-607. Effect of Acceptance; Notice of Breach

Answer 43

§2-607. Effect of Acceptance; Notice of Breach (1) The buyer must pay at the contract rate for any goods accepted. (2) Acceptance of goods by the buyer precludes rejection of the goods accepted and if made with knowledge of a non-conformity cannot be revoked because of it unless the acceptance was on the reasonable assumption that the non-conformity would be seasonably cured but acceptance does not of itself impair any other remedy provided by this Article for non-conformity.

Question 44

§2-607(4). Burden of Establishing Breach After Acceptance

Answer 44

(4) The burden is on the buyer to establish any breach with respect to the goods accepted.

Question 45

§2-607(3), (5), (6). Notice of Claim or Litigation to Personal Answerable Over.

Answer 45

(3) Where a tender has been accepted (a) the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy; and (b) if the claim is one for infringement or the like (subsection (3) of Section 2-312) and the buyer is sued as a result of such a breach he must so notify the seller within a reasonable time after he receives notice of the litigation or be barred from any remedy over for liability established by the litigation. (5) Where the buyer is sued for breach of a warranty or other obligation for which his seller is answerable over (a) he may give his seller written notice of the litigation. If the notice states that the seller may come in and defend and that if the seller does not do so he will be bound in any action against him by his buyer by any determination of fact common to the two litigations, then unless the seller after seasonable receipt of the notice does come in and defend he is so bound. (b) if the claim is one for infringement or the like (subsection (3) of Section 2-312) the original seller may demand in writing that his buyer turn over to him control of the litigation including settlement or else be barred from any remedy over and if he also agrees to bear all expense and to satisfy any adverse judgment, then unless the buyer after seasonable receipt of the demand does turn over control the buyer is so barred. (6) The provisions of subsections (3), (4) and (5) apply to any obligation of a buyer to hold the seller harmless against infringement or the like (subsection (3) of Section 2-312).

Question 46

§2-608. Revocation of Acceptance in Whole or in Part.

Answer 46

§2-608. Revocation of Acceptance in Whole or in Part. (1) The buyer may revoke his acceptance of a lot or commercial unit whose non-conformity substantially impairs its value to him if he has accepted it (a) on the reasonable assumption that its non-conformity would be cured and it has not been seasonably cured; or (b) without discovery of such non-conformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller’s assurances. (2) Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. It is not effective until the buyer notifies the seller of it. (3) A buyer who so revokes has the same rights and duties with regard to the goods involved as if he had rejected them.

Question 47

§2-612(1). “Installment K”

Answer 47

§2-612(1) “Installment K” (1) An “installment contract” is one which requires or authorizes the delivery of goods in separate lots to be separately accepted, even though the contract contains a clause “each delivery is a separate contract” or its equivalent.

Question 48

§2-612(2)-(3). “Installment K”; Breach.

Answer 48

§2-612. “Installment K”; Breach. (2) The buyer may reject any installment which is non-conforming if the non-conformity substantially impairs the value of that installment and cannot be cured or if the non-conformity is a defect in the required documents; but if the non-conformity does not fall within subsection (3) and the seller gives adequate assurance of its cure the buyer must accept that installment. (3) Whenever non-conformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a breach of the whole. But the aggrieved party reinstates the contract if he accepts a non-conforming installment without seasonably notifying of cancellation or if he brings an action with respect only to past installments or demands performance as to future installments.