Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. and the Legal Environment, 10 th edition by Richard A. Mann & Barry S. Roberts Essentials of Business Law and the Legal Environment, 10 th edition by Richard A. Mann & Barry S. Roberts

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Topics Covered Chapter 20: Contract Remedies A. Performance by the Seller B. Performance by the Buyer C. Obligations of Both Parties

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Performance by the Seller n Tender of Delivery – the seller makes available to the buyer goods conforming to the contract and so notifies the buyer. –Buyer – obligated to accept conforming goods. –Seller – entitled to payment of the contract price. n Time of Tender – tender must be made at a reasonable time and kept open for a reasonable period of time. n Place of Tender – if none is specified, place for delivery is the seller's place of business or, if he has no such place, his residence.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Identification of Goods Tender of Performance by Seller Continued on next slide… (match arrow numbers) YesNo Duly delivered? Shipment contract Breach 1 NoYes Seller holds goods for buyer at destination? Destination contract Breach 2 NoYes Seller tenders document of title? Goods held by bailee without moving 3 4 NoYes Seller notifies buyer that goods are held at his disposal? Seller holds goods for buyer Breach 5

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Tender of Performance by Seller (cont.) Proper contract? Notifies buyer of shipment? No Yes No Yes Breach 1 Notifies buyer? Yes No Yes Breach 2 Yes 3 No Bailee acknowledges buyer’s right to possession? No Yes Breach 4 Yes 5 Tender Yes

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Place of Tender n Shipment Contracts – seller must tender delivery of the goods to a carrier for delivery to buyer; shipment terms include: F.O.B. place of shipment, F.A.S. port of shipment, C.I.F., C.&F. n Destination Contracts – seller must tender delivery of goods at a named destination; destination terms include: F.O.B. place of destination; ex-ship; no arrival, no sale. n Goods Held by Bailee – seller must either tender to the buyer a document of title or obtain an acknowledgment from the bailee.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Perfect Tender Rule n The seller's tender of performance must conform exactly to the contract, subject to the following qualifications: –Agreement by the Parties – the parties may contractually limit the operation of the perfect tender rule. –Cure by the Seller – when the time for performance under the contract has not expired or when the seller has shipped nonconforming goods in the belief that the nonconforming tender would be acceptable, a seller may cure or correct her nonconforming tender.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Installment Contracts n When the contract calls for the goods to be delivered in separate lots, the buyer may reject a nonconforming installment if it substantially impairs the value of that installment and cannot be cured. n If nonconformity or default of one or more of the installments substantially impairs the value of the whole contract, the buyer can treat the breach as a breach of the whole contract.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Performance by the Buyer n Inspection –the buyer has a reasonable time to inspect goods to determine if they conform. n Rejection – buyer's manifestation of unwillingness to become the owner of the goods; must be made within a reasonable time after the goods have been tendered or delivered and gives the buyer the right to (1)­reject all of the goods, (2)­accept all of the goods, or (3)­accept any commercial unit(s)­ and reject the rest

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Performance by the Buyer n Acceptance – buyer's expressed or implied willingness to become the owner of the goods. n Revocation of Acceptance – rescission of acceptance if a nonconformity substantially impairs their value, provided that acceptance was (1) based on an assumption that the nonconformity would be cured by the seller and it was not, or (2) the nonconformity was an undiscovered hidden defect. n Obligation of Payment – in the absence of an agreement, payment is due at the time and place the buyer is to receive the goods.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Breach by seller Performance by the Buyer Goods conform Breach by buyer Goods conform Buyer liable for price Goods do not conform Seller cures defect Seller does not cure Goods do not conform Buyer revokes acceptance Buyer retains goods Buyer rejects goods Buyer accepts goods OR Buyer liable for price Buyer rejects Buyer accepts Breach by buyer Breach by seller

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Obligations of Both Parties n Casualty to Identified Goods – if goods were identified when the contract was made and those goods are totally lost or damaged with-out fault of either party and before risk of loss passes to the buyer, the contract is avoided. n Nonhappening of Presupposed Condition – the seller is excused from the duty of performance on the nonoccurrence of presupposed conditions that were a basic assumption of the contract, unless the seller has expressly assumed the risk.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Obligations of Both Parties n Substituted Performance – where neither party is at fault and the agreed manner of goods becomes commercially impracticable, a substituted manner of performance must be tendered and accepted.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Rights n Right to Adequate Assurance of Performance – when reasonable grounds for insecurity arise regarding either party's performance, the other party may demand written assurance and suspend his own performance until he receives that assurance. n Right to Cooperation – where one party's required cooperation is untimely, the other party is excused from any resulting delay in her own performance.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Anticipatory Repudiation n Anticipatory Repudiation – if either party clearly indicates an unwillingness or inability to perform before the performance is due, the other party may await performance for a reasonable time or resort to any remedy for breach.