2. P A R T P A R T Sales Formation & Terms Product Liability Performance of Sales Contract Remedies for Breach of Sales Contracts 4 McGraw-Hill/Irwin Business Law, 13/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

3. Performance of Sales Contracts PA E TR HC 21 “Business neglected is business lost.” Daniel Defoe, novelist, The Complete English Tradesman (1726)

4. Learning Objectives  General rules of performance under the Uniform Commercial Code  Delivery, inspection, and payment  Acceptance, revocation, and rejection  Assurance, repudiation, and excuse 21 - 4

5.  Parties must act in good faith in performance of a sales contract [1–203]  If express terms conflict with trade usage or past course of dealing, express terms prevail [1– 205(4)]  Consideration not required for modification, but parties may require a writing [2–209]  A party must object to repeated failure of other party to perform or waive rights [2–209(4)] General Rules of The UCC 21 - 5

6.  Basic duty of seller is to deliver (at seller’s place of business) goods that conform to the contract with buyer and basic duty of buyer is to accept and pay for goods if conforming to contract [2–301]  Buyer has right of inspection  If goods conform, buyer pays inspection costs; if non-conforming, buyer may recover expenses from seller [2–513(2); 2–715(1)] UCC Delivery & Inspection 21 - 6

7.  Once goods accepted, buyer obligated to pay  Buyer and seller may agree to payment in money, goods, services, or real property  International sales often use irrevocable letter of credit (diagram on page 526) Payment Under The UCC 21 - 7

8.  Buyer may revoke accepting nonconforming goods if (a) non-conformity substantially impairs value, (b) buyer did not know of non-conformity, (c) buyer relied on seller’s promise to cure [2–608(1)]  If buyer rejects a delivery of goods, buyer must act within reasonable time after delivery and give seller notice of rejection, [2–602] Revocation & Rejection 21 - 8

9.  If one party is reasonably concerned other party may not perform, concerned party may demand assurance ( reasonable time) from other party that contract will be performed  See Koch Materials Co. v. Shore Slurry Seal, Inc.  Commercial impracticability may be excuse for non-performance if performance highly impracticable, unreasonably expensive, or little value to promisee [UCC 2–615] Assurances & Excuses 21 - 9

10. Test Your Knowledge  True=A, False = B  Goods are to be delivered at buyer’s place of business unless otherwise specified by contract  If goods delivered conform to the contract, the buyer must pay any expenses of inspection.  Buyer may revoke its acceptance of goods not conforming to the contract if the nonconformity substantially impairs the value of the goods 21 - 10

11. Test Your Knowledge  Multiple Choice  Jersey Steel contracted to deliver 50 M12 metric threaded rods to HomeCo each week for nine months. Four months later, Jersey Steel erected a new sign at their site with name “United Steel.” HomeCo may:  (a) Cancel the contract  (b) Demand assurances of performance from Jersey Steel  (c) Stop any payments until all nine months of deliveries have been received  (d) None of the above 21 - 11

12. Thought Question  If you contracted with another party for a long-term sale of goods contract, what kind of activities would prompt you to demand assurances of performance? 21 - 12