1. Chapter 20 Remedies for Breach of Sales and Lease Contracts

2. Seller and Lessor Performance
The seller’s or lessor’s basic obligation is the tender of delivery
Tender of delivery: The obligation of a seller to transfer and deliver goods to the buyer or lessee in accordance with a sales or lease contract
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3. Seller and Lessor Performance
Place of Delivery
The UCC stipulates place of delivery based on the following rules:
Noncarrier cases
Carrier cases
Shipment contract
Destination contract
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4. Seller and Lessor Performance
Shipment contract: A sales contract that requires the seller to send the goods to the buyer but not to a specifically named destination
Destination contract: A sales contract that requires the seller to deliver the goods to the buyer’s place of business or another specified destination
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5. Seller and Lessor Performance
Perfect Tender Rule
If the goods or tender of a delivery fail in any respect to conform to the contract, the buyer may opt to:
Reject the entire shipment
Accept the whole shipment
Reject part and accept part of the shipment
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6. Seller and Lessor Performance
Installment contracts
Requires or authorizes goods to be delivered and accepted in separate lots
The entire contract can be rejected only if the default
Destruction of goods
If goods identified in a sales or lease contract are totally destroyed without fault of either party before the risk of loss passes to either party, the contract is void
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7. Seller and Lessor Performance
Right of Inspection
Buyer has the right to inspect goods before paying for them
Exception – COD and CIF contracts
Buyer may reject nonconforming goods
Parties may agree as to time and place of inspection
If contract silent, inspection must occur at reasonable time and place
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8. Seller and Lessor Performance
Acceptance
Acceptance occurs in each of the following cases:
The buyer indicates acceptance by words
The buyer fails to reject goods within reasonable time
The buyer acts inconsistently with seller’s ownership rights
Buyers/lessee may accept only “commercial unit”
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9. Seller and Lessor Performance
Payment
Due from buyer when and where goods delivered
Contract may set terms
Can be paid in any manner acceptable in ordinary course of business
If cash required, buyer must be given an extension to secure cash
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10. Seller and Lessor Performance
Revocation of Acceptance: Buyer can revoke acceptance if:
Goods are nonconforming
Nonconformity substantially impairs value of goods
Seller’s promise to timely cure are not met
Goods were accepted before nonconformity discovered and the nonconformity was difficult to discover
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11. Seller and Lessor Performance
Goods were accepted before nonconformity discovered and seller/lessor assured buyer/lessee that goods were conforming
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12. Seller and Lessor Remedies
Right to withhold delivery
Right to stop delivery of goods in transit
Right to reclaim goods
Right to dispose of goods
Right to recover the purchase price or rent
Right to recover damages for breach of contract
Right to cancel a contract
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13. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
Unfinished Goods
Seller/lessor may cease manufacture and sell for scrap or salvage value, or
Complete manufacture and resell or release, and recover damages
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14. Buyer and Lessee Remedies
Right to reject nonconforming goods or improperly tendered goods
Right to recover goods from an insolvent seller or lessor
Right to obtain specific performance
Right to replevy goods
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15. Buyer and Lessee Remedies
Right to cancel a contract
Right to recover damages for nondelivery or repudiation
Right to recover damages for accepted nonconforming goods
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16. Additional Performance Issues
Assurance of Performance
Party with grounds to believe that the other party will not perform may demand adequate assurance of performance
Performance may be suspended until adequate assurance of due performance is received from the other party
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17. Additional Performance Issues
Statute of Limitations
Action for breach of sales or lease contract must commence within four years after the cause of the action accrues
Parties may reduce time to one year
Parties cannot extend the time beyond four years
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18. Additional Performance Issues
Agreements Affecting Remedies
Parties may agree to remedies in addition to those available under the UCC, or agree to limit remedies
Liquidated damages may be substituted
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19. Additional Performance Issues
Liquidated Damages
Damages that will be paid upon a breach of the contract
Preestablished damages
Substitute for actual damages
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20. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
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