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Chapter 27 Obligations and Performance

Chapter 27 Obligations and Performance. Twomey, Business Law and the Regulatory Environment (14th Ed.). Performance Obligations [27-1]. SELLER Good Faith Timely Performance. BUYER Good Faith Timely Performance. RESPONSE. ISSUE. Demand for adequate assurance Anticipatory repudiation

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Chapter 27 Obligations and Performance

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  1. Chapter 27Obligations and Performance Twomey, Business Law and the Regulatory Environment (14th Ed.)

  2. Performance Obligations[27-1] SELLER Good Faith Timely Performance BUYER Good Faith Timely Performance RESPONSE ISSUE Demand for adequate assurance Anticipatory repudiation Retraction of anticipatory repudiation Right to cure if time left for performance Right of inspection Right of rejection of nonconforming goods COD shipment CIF, CF shipment 1. Will other side be able to perform? 2. Other side fails to provide assurances 3. Other side can now perform 4. Wrong goods delivered 5. Are goods conforming? 6. Will buyer pay? Chapter 27

  3. Duties of the Parties [27-1] I. Seller’s Duty to Deliver A. Make goods available to buyer. B. Deliver goods to the place, at the time, and in the manner stated in the contract. C. Tender or deliver proper quantity of conforming goods. II. Buyer’s Duty to Accept Conforming Goods A. Accept goods by express approval, lapse of time, use of goods, failure to attempt to return goods, or modification of goods. III. Buyer’s Duty to Pay A. Pay for goods accepted. B. Pay amount stated in sales contract. C. Pay in a timely manner. D. Pay in the appropriate form (cash unless otherwise agreed). Chapter 27

  4. Chapter 27 Summary Every sales contract imposes an obligation of good faith in its performance. Good faith means honesty in fact in the conduct or transaction concerned. For merchants, the UCC imposes the additional requirement of observing “reasonable commercial standards of fair dealing in the trade.” Chapter 27

  5. Chapter 27 Summary [2] In the case of a cash sale where no transportation of the goods is required, both the buyer and the seller may demand concurrent performance. A buyer’s or a seller’s refusal to perform a contract is called a repudiation. A repudiation made in advance of the time for performance is called an anticipatory repudiation and is a breach of the contract. Chapter 27

  6. Chapter 27 Summary [3] If either party to a contract feels insecure about the performance of the other, that party may demand in writing adequate assurance of performance. If that assurance is not given, the demanding party may treat the contract as repudiated. Chapter 27

  7. Chapter 27 Summary [4] The seller has a duty to deliver the goods in accordance with the terms of the contract. This duty does not require physical transportation; it requires that the seller permit the transfer of possession of the goods to the buyer. Chapter 27

  8. Chapter 27 Summary [5] With the exception of COD contracts, the buyer has the right to inspect the goods upon tender or delivery. Inspection includes the right to open cartons and conduct tests. If the inspection by the buyer reveals that the seller has tendered nonconforming goods, the buyer may reject them. Subject to certain limitations, the seller may then offer to replace the goods or cure the problems the buyer has noted. Chapter 27

  9. Chapter 27 Summary [6] The buyer has a duty to accept goods that conform to the contract, and refusal to do so is a breach of contract. The buyer is deemed to have accepted goods either expressly or by implication through conduct inconsistent with rejection or by lapse of time. The buyer must pay for accepted goods in accordance with the terms of the contract. Chapter 27

  10. Chapter 27 Summary [7] The buyer can reject goods in commercial units, accept the goods and collect damages for their problems, or reject the full contract shipment. The buyer must give notice of rejection to the seller and cannot do anything with the goods that would be inconsistent with the seller’s ownership rights. The buyer should await instructions from the seller on what to do with the goods. Chapter 27

  11. Chapter 27 Summary [8] Even following acceptance, the buyer may revoke that acceptance if the problems with the goods substantially impair their value and the problems were either not easily discoverable or the buyer kept the goods based on the seller’s promises to repair them and make them whole. Upon revocation of acceptance, the buyer should await instructions from the seller on what steps to take. Chapter 27

  12. Chapter 27 Summary [9] Performance can be excused on the grounds of commercial impracticability, but the seller must show objective difficulties that create more than cost increases. Chapter 27

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