LAW 506-002 – Contracts II
Perfect Tender Rule
Buyer's Rights on Improper Delivery.
Subject to the provisions of this Article on breach in installment contracts ([UCC § 2-612]) and unless otherwise agreed under the sections on contractual limitations of remedy ([UCC § 2-718 and UCC § 2-719]), if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may
- reject the whole; or
- accept the whole; or
- accept any commercial unit or units and reject the rest.
. . .
- . . . Partial acceptance is permitted whether the part of the goods accepted conforms or not. The only limitation on partial acceptance is that good faith and commercial reasonableness must be used to avoid undue impairment of the value of the remaining portion of the goods. . . . In this respect, the test is not only what unit has been the basis of contract, but whether the partial acceptance produces so materially adverse an effect on the remainder as to constitute bad faith.
Manner and Effect of Rightful Rejection.
- Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.
- Subject to the provisions of the two following sections on rejected goods ([UCC § 2-603 and UCC § 2-604]),
- after rejection any exercise of ownership by the buyer with respect to any commercial unit is wrongful as against the seller; and
- if the buyer has before rejection taken physical possession of goods in which he does not have a security interest under the provisions of this Article ([UCC § 2-711(3)]), he is under a duty after rejection to hold them with reasonable care at the seller's disposition for a time sufficient to permit the seller to remove them; but
- the buyer has no further obligations with regard to goods rightfully rejected.
- The seller's rights with respect to goods wrongfully rejected are governed by the provisions of this Article on Seller's remedies in general ([UCC § 2-703]).
Manner of Seller's Tender of Delivery.
- Tender of delivery requires that the seller put and hold conforming goods at the buyer's disposition and give the buyer any notification reasonably necessary to enable him to take delivery. The manner, time and place for tender are determined by the agreement and this Article, and in particular
- Where the case is within the next section respecting shipment tender requires that the seller comply with its provisions.
- Where the seller is required to deliver at a particular destination tender requires that he comply with subsection (1) and also in any appropriate case tender documents as described in subsections (4) and (5) of this section.
- Where goods are in the possession of a bailee and are to be delivered without being moved
- tender requires that the seller either tender a negotiable document of title covering such goods or procure acknowledgment by the bailee of the buyer's right to possession of the goods; but
- tender to the buyer of a non-negotiable document of title or of a record directing the bailee to deliver is sufficient tender unless the buyer seasonably objects, and except as otherwise provided in Article 9 receipt by the bailee of notification of the buyer's rights fixes those rights as against the bailee and all third persons; but risk of loss of the goods and of any failure by the bailee to honor the non-negotiable document of title or to obey the direction remains on the seller until the buyer has had a reasonable time to present the document or direction, and a refusal by the bailee to honor the document or to obey the direction defeats the tender.
- Where the contract requires the seller to deliver documents
- he must tender all such documents in correct form, except as provided in this Article with respect to bills of lading in a set ([UCC § 2-323(2)]); and
- tender through customary banking channels is sufficient and dishonor of a draft accompanying or associated with the documents constitutes non-acceptance or rejection.
Delivery in Single Lot or Several Lots.
Unless otherwise agreed all goods called for by a contract for sale must be tendered in a single delivery and payment is due only on such tender but where the circumstances give either party the right to make or demand delivery in lots the price if it can be apportioned may be demanded for each lot.
Shipment by Seller.
- put the goods in the possession of such a carrier and make such a contract for their transportation as may be reasonable having regard to the nature of the goods and other circumstances of the case; and
- obtain and promptly deliver or tender in due form any document necessary to enable the buyer to obtain possession of the goods or otherwise required by the agreement or by usage of trade; and
- promptly notify the buyer of the shipment.
- Tender of delivery is a condition to the buyer's duty to accept the goods and, unless otherwise agreed, to his duty to pay for them. Tender entitles the seller to acceptance of the goods and to payment according to the contract.
- Where payment is due and demanded on the delivery to the buyer of goods or documents of title, his right as against the seller to retain or dispose of them is conditional upon his making the payment due.
Tender of Payment by Buyer; Payment by Check.
- Unless otherwise agreed tender of payment is a condition to the seller's duty to tender and complete any delivery.
- Tender of payment is sufficient when made by any means or in any manner current in the ordinary course of business unless the seller demands payment in legal tender and gives any extension of time reasonably necessary to procure it.
- Subject to the provisions of this Act on the effect of an instrument on an obligation ( Section 3-310), payment by check is conditional and is defeated as between the parties by dishonor of the check on due presentment.
Exceptions to the Perfect Tender Rule
- Bad Faith
- See comment in UCC § 2-601
Cure by Seller of Improper Tender or Delivery; Replacement.
- Installment Contract
What Constitutes Acceptance of Goods.
- Acceptance of goods occurs when the buyer
- Acceptance of a part of any commercial unit is acceptance of that entire unit.
- The buyer must pay at the contract rate for any goods accepted.
- Where a tender has been accepted
- The burden is on the buyer to establish any breach with respect to the goods accepted.
- Where the buyer is sued for breach of a warranty or other obligation for which his seller is answerable over
Unless later revoked
Revocation of Acceptance in Whole or in Part.
- Acceptance of goods occurs when the buyer
Waiver of Buyer's Objections by Failure to Particularize.
- The buyer's failure to state in connection with rejection a particular defect which is ascertainable by reasonable inspection precludes him from relying on the unstated defect to justify rejection or to establish breach
- Payment against documents made without reservation of rights precludes recovery of the payment for defects apparent in the documents.