UCC Remedies Flashcards
Remedies
Buyer’s Rejection of Goods
General; Exceptions
A. General
Under the UCC, if the goods or tender of delivery fail in any respect to conform to the contract, then buyer may reject or accept some or all of the goods.
* Analysis - after seller tenders delivery of goods, then buyer must accept or reject in a timely manner or UCC deems silence is acceptance.
B. Exceptions to Perfect Tender Rule
a. Shipment K - if seller fails to make proper arrangments with carrier, or to notify buyer that goods have been shipped, and material loss or delay occur, then buyer may reject.,
b. Delivery Impracticable - if agreed upon delivery becomes commercially impracticable, then a reasonable substitute must be tendered by seller and accepted by buyer.
c. Installment K - if installment contract then buyer many not reject any nonconforming installment UNLESS nonconformity substantially impairs value of the installment AND it cannot be cured.
d. Course of Dealing - if course of dealing, course of performance, or usage of the trade requires acceptance of goods, then buyer must accept goods.
e. Agreement - if parties agreed that buyer will accept nonconforming goods, then acceptance is required.
C. Rules of Proper Rejection
Remedies
Buyer’s Rejection of Goods
Proper Rejection
Under the UCC, the buyer must do the following in order to properly reject a tendering of goods:
i) Notify the seller of the rejection within a reasonable time;
* Reasonable - depends on facts such as difficulty of discovering defect, specific terms of k, etc.
ii) Notify the seller of the particular defect; and
* Between Merchants -
iii) Hold the goods for a reasonable time
Remedies
Buyer’s Rejection of Goods
Buyer’s Responsibilites After Rejection
a. If Buyer has Security Interest in Goods
Under the UCC, if the buyer rejects the tendered goods and has a security interest in said goods, then buyer has a security interests in goods that it controls and has made payments upon.
b. If Buyer has No Security Interest in Goods
Under the UCC, if the buyer rejects the tendered goods and does not have a security interest in said goods, then buyer must hold the goods with reasonable care at the seller’s disposition.
If seller does fials to give instructions within a reasonble time, buyer may i) store the goods for seller’s account, ii) reship them to seller, or iii) resell them for seller’s account in good faith. All expenses incurred by buyer must be reimbursed by seller.
c. Buyer Resells Rejected Goods
All expenses incurred by buyer must be reimbursed by seller.
Remedies
Seller’s Right to Cure
General; Belief Nonconforming Acceptable
A. General
Under the UCC, if buyer rejects any tender or delivery by the seller, and the time for performance has not expired, then seller may notify buyer of his intent to cure and do so within the contracted time.
Ex: Stanley Seller contracts with Brenda Buyer to deliver a blue truck on or before December 1. On November 15, Stanley delivers a silver truck and Brenda rejects it. Stanley may cure by notifying Brenda of his intention to cure and delivering a conforming blue truck by December 1.
B. Reasonable Grounds Noncorming Would Be Accepted
Under the UCC, if buyer rejects nonconforming tender that seller had reasonble grounds to believe would be acceptable, then seller may notify buyer of an intent to produce substitute conforming tender to which seller shall have a reaonble time beyond the contract time.
* Reasonable Grounds - prior course of dealing, trade usage, etc.
Ex: In the above example, before signing the contract, Brenda told Stanley that the color of the truck did not matter to her and she would accept any color truck. If Brenda then rejects the silver truck, Stanley would have a reasonable time after the contract date of December 1 to cure the defect by substituting a conforming blue truck.
C. Installment K
Under the UCC, nonconforming tender in an installment contract may not be rejected when in can be cured within the installment period.
Remedies
Acceptance of Goods
Under the UCC, acceptance occurs when the buyer:
i) after a reasonable opportunity to inspect, signifies that the goods are conforming or that he will accept them in spire of nonconformity;
ii) after ar easonble opportunity to inspect, fails to make an effective rejection; or
iii) engages in conduct inconsistent with seller’s ownership of the goods.
Remedies
Consequences of Acceptance
Under the UCC, if any goods are accepted, the following consequences occur:
- Buyer must pay the full price for accepted goods
- Buyer’s right to reject is extinguished (except in re revocation of acceptance)
- Buyer must notify the seller of the breach or be barred
- Burden of proof to establish breach is on the buyer
Remedies
Revocation of Acceptance
Under the UCC, buyer may revoke acceptance if the defect substantially impairs the value of the goods and:
i) buyer accepted the goods upon the reasonble belief that seller would cure the defect and they did not; or
ii) buyer accepted the goods without discovery of the nonconformity, and such acceptance was induced upon
a) the difficulty discovery of the nonconformity or
b) assurances by seller that the goods were conforming.
* Timely Revocation - buyer must revoke within a reasonble time; buyer failure to exercise due diligence will extinguish right
* Goods Unchanged - must revoke before any substantial change in condition of goods not caused by the defect
Remedies
Buyer’s Remedies
Damages
Under the UCC, when there has been nondelivery/proper rejection/proper revocation, the buyer may have rights to damages, replevin, or specific performance
- Damages
a. K Price v. Market Price - market price deteremed at place of tender and time buyer learns of failure of performance.
Ex: Bernie Buyer enters into a contract with Shelley Seller to purchase 100 barrels of oil at $50 per barrel, delivery to take place at Bernie’s Texas refinery on July 1. Shelley fails to deliver the oil. On July 1, the price of oil near Bernie’s Texas refinery was $75 per barrel. Under the benefit-of-the-bargain damages formula, Bernie’s measure of damages will be $25 per barrel, and he is entitled to $2,500.
b. K Price v. Cost of Replacement - difference between k price and cost of actually replacing the goods; must be reasonable and in good faith
Ex: Assume the same facts as the example above. When Shelley fails to deliver on July 1, Bernie, in good faith, calls a reputable local oil dealer who immediately supplies the oil to Bernie at $80 per barrel. Under the cover formula for damages, Bernie’s measure of damages will be $30 per barrel, and Bernie would be entitled to $3,000.
c. Incidental and Consequential - in addition to either of the above damage remedies;
i) Incidental - damages that are incidental to the seller’s failure to perform, such as the costs of warehousing, transportation, inspection, etc.
ii) Consequential - damages resulting from general or particular requirements and needs of which the seller, at the time of contracting, had reason to know and which could not be reasonably prevented by purchasing substitute goods or otherwise. Consequential damages must have been foreseeable to the seller at the time of contracting.
Remedies
Buyer’s Remedies
Right to Replevin
Under the UCC, when there has been nondelivery/proper rejection/proper revocation, the buyer may have rights to damages, replevin, or specific performance
- Right to Replevin
a. Buyer Unable to Effect Cover
The buyer has a right of replevin for any goods identified to the contract if, after reasonable effort, the buyer is unable to effect cover (i.e., obtain an adequate substitute) for such goods, or the circumstances reasonably indicate that such an effort would be unavailing.
Ex: Seller and Buyer enter into a contract for the sale of 1,000 mufflers for $100,000 by January 1. Seller identifies the mufflers from its inventory, sets them aside, and marks them for delivery to Buyer. Seller subsequently fails to deliver the mufflers by the contract date. Buyer attempts to purchase similar mufflers in the market but is unable to do so. Buyer is entitled to replevy the mufflers from Seller.
b. Partial-payment situations
The buyer may also replevy undelivered goods that have been identified under the contract when:
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).
Remedies
Buyer’s Remedies
Specific Performance
Under the UCC, when there has been nondelivery/proper rejection/proper revocation, the buyer may have rights to damages, replevin, or specific performance
- Specific Performance
When the undelivered goods are unique “or in other proper circumstances,” a court may order specific performance even if the goods have not yet been identified to the contract by the seller.
NOTE: that under the remedy of replevin, the goods must have been identified to the contract, but under the remedy of specific performance, the goods need not have been identified to the contract.
Remedes
Buyer’s Damages as to Accepted Goods
Under the UCC, if buyer accepts goods that are nonconforming, and notifies the buyer of the breach, then buyer may recovered damages in the amount the cost to repair or replace the goods.
