Chapter 10 Sales and Leases: Performance and Breach

1. Chapter 10Sales and Leases: Performance and Breach

2. Learning Objectives • What are the respective obligations of the parties under a contract for sale/lease of goods? • What is the perfect tender rule? • What options are available to a non-breaching party when the other party repudiates the contract prior to performance? • Are parties free to set the remedies available to the non-breaching party in the event of breach of contract?

3. Performance Obligations • Good faith and commercial reasonableness are implied in every contract. • Seller has a basic obligation to transfer and deliver conforming goods. • Buyer’s basic obligation is the accept and pay for conforming goods.

4. Seller’s Obligations • Tender of Delivery • Seller has duty to notify Buyer that conforming goods are at the disposal of the Buyer to take delivery. • Reasonable place and time.

5. Seller’s Obligations • Place of Delivery (For Tender) • Non-Carrier: Seller’s place of business • Carrier Cases • Shipment: Seller must put conforming goods in carrier’s hands, notify Buyer shipment has been made and provide relevant documents. • Destination: Seller agrees to deliver goods at a particular destination.

6. Seller’s Obligations • Perfect Tender Rule • Seller has duty to ship/tender conforming goods. • If goods fail to conform to the agreement in any way, the Buyer has the right to: • Accept the entire shipment. • Reject the entire shipment • Accept or reject part of the shipment.

7. Seller’s Obligations • “Tender Rule” Exceptions: • Agreement of the Parties • Seller can “cure” within time for performance. • Substitution of Carriers • Installment Contracts • Commercial Impracticability • Foreseeable vs. Unforeseeable Circumstances. • Destruction of Identified Goods

8. Buyer’s Obligations • Payment • Right of Inspection • C.O.D. Shipment • Payment Due-Documents of Title • Acceptance • Expressly by words or conduct • Presumed if Buyer had opportunity to inspect and failed to reject within a reasonable time.

9. Anticipatory Repudiation • Prior to performance, one party communicates to the other his intention not to perform. The non-breaching party can either: • Treat the repudiation as a final breach and pursue a remedy OR • Wait to see if the repudiating party will honor its obligations. • In either case, the non-breaching party may suspend her own performance.

10. Seller’s Remedies • The following remedies are available when Buyer is in Breach. • If goods are in Seller’s Possession, Seller has the right to: • Cancel the Contract • Withhold Delivery • Resell or Dispose of Goods (Incidental Damages) • Recover the Purchase Price Due • Right to Recover Damages

11. Seller’s Remedies • If while goods are in transit, Seller learns that buyer is insolvent or will not perform, it has the right to: • Stop the Carrier and Cancel the Contract • Resell Goods • Sue to recover the Deficiency between contract price and market. • Sue to Recover Damages

12. Seller’s Remedies • When Goods are in Buyer’s Possession, Seller has the right to: • Recover the Purchase Price or Payments Due • Right to Reclaim Goods

13. Buyer’s Remedies • If the Seller is in breach of contract, the Buyer has various remedies. • If Seller refuses to deliver the goods, the Buyer has the right to: • Cancel the Contract • Recover the Goods • Obtain Specific Performance • “Cover” • Recover Damages

14. Buyer’s Remedies • If Seller delivers non-conforming goods, Buyer has the right to: • Reject Goods with Notice • Revoke Acceptance • Recover Damages for Accepted Goods

15. Limitation of Remedies • Parties can agree to limit remedies. • Parties can expressly agree to provide additional remedies than available under UCC. • Parties can agree that a remedy is exclusive (the only remedy available).

16. Statute of Limitations • Action for breach of contract under UCC must commence within four years after the injury. • Plus, injured party must give adequate notice of injury to other party within a reasonable time.