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“Trade and commerce, if they were not made of Indian rubber, would
never manage to bounce over the obstacles which legislators are continually putting in
their way.” Henry D. Thoreau
I. Teacher to Teacher Dialogue
performance duties. These sections of the code attempt to anticipate and answer problematic
situations that arise in the topsy-turvy world of business. The interesting and innovative aspect of
many of these modifications of basic performance duties is that the UCC seeks to provide
anticipatory sorts of changes, i.e., changes which seek to mitigate the problems rather than
doctrines found in other sections of the UCC, real estate law, and common law. It is designed to
reflect existing leasing practices while clarifying the respective rights and duties of the parties to
the transaction. The basic rules of common law contracts, as amended by the UCC, are carried
over into Article 2A. The writing requirements have been tailored to fit the lease transaction, and
used as a back door to get out from under binding contract obligations. The burden of proof on
the person claiming excuse is a heavy one.
REMEDIES FOR BREACH OF SALES
AND LEASE CONTRACTS
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II. Chapter Objectives
1. Describe the performance of sales and lease contracts.
2. List and describe the seller’s remedies for the buyer’s breach of a sales contract.
3. List and describe the buyer’s remedies for the seller’s breach of a sales contract.
III. Key Question Checklist
Who is in breach of the UCC contract?
If it is the buyer, what out-of-court remedies does the seller have?
If no out-of-court remedies are exhausted or not applicable, what in-court remedies does the
IV. Text Materials
Parties to a contract have an obligation to perform as expected. If one party breaches the contract,
the UCC provides a variety of remedies.
Seller and Lessor Performance
Tender of delivery at the time and place stated in the contract is the basic obligation of the seller
or lessor. The seller is required to hold conforming goods for the buyer and to notify him of their
Place of Delivery – If the contract is silent, the UCC stipulates place of delivery on the basis of
whether a carrier is used.
Noncarrier Cases – Unless otherwise specified, the delivery is made at the seller’s place of
business. If the goods are in the possession of a bailee and are to be delivered without being
Carrier Cases – The UCC establishes different rules for shipment and destination contracts.
Shipment Contracts – Shipment goods must be put in the carrier’s possession, with the proper
paperwork, and the buyer must be notified of the shipment.
Destination Contracts – These call for delivery to the buyer’s place of business or some other
destination within a reasonable amount of time and in a reasonable manner.
Remedies for Breach of Sales and Lease Contracts
Perfect Tender Rule – The seller or lessor must deliver conforming goods, unless both parties
Exceptions to the Perfect tender Rule – The UCC allows two exceptions to this rule. The
parties may agree to allow the buyer to reject only the nonconforming goods, the seller to replace
Contemporary Environment: Seller’s and Lessor’s UCC Right to Cure
Destruction of Goods – The UCC states that if the goods are destroyed through no fault of either
party and before the risk passes to the buyer or lessee, the contract is void.
Critical Legal Thinking – An experienced court of law will not have a problem applying these
Buyer and Lessee Performance
Right of Inspection – Unless otherwise stated, the buyer or lessee has a right to inspect goods
delivered to them before accepting or paying for them, unless they have agreed to a C.O.D.
Acceptance – After a reasonable opportunity to inspect the goods, the buyer may signify in
words or actions that the goods are conforming or otherwise acceptable. If the buyer fails to reject
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goods were conforming.
Seller and Lessor Remedies
Right to Withhold Delivery – If the buyer or lessee breaches the contract, the seller or lessor
Right to Stop Delivery of Goods in Transit – If the buyer or lessee becomes insolvent,
repudiates the contract, or fails to make payments, the seller or lessor may stop the delivery under
the UCC.
Right to Dispose of Goods – If the buyer or lessee repudiates or breaches the contract before
scrap or complete manufacture and resell.
Right to Recover the Purchase Price or Rent – The seller or buyer may also recover the
purchase price from a buyer or lessee that accepts the goods and fails to pay for them, if the buyer
breaches the contract after the goods have been identified and the seller cannot resell them, or if
Right to Recover Damages for Breach of Contract – Damages may be recovered if the buyer
or lessee repudiate the contract or wrongfully reject the tendered goods. They may also seek to
recover lost profits plus reasonable overhead and incidental damages.
Contemporary Environment: Lost Volume Seller
How does one establish an appropriate measure of damages where the goods in question are sold
to a new third party? At first blush, it appears that no real harm is done to the seller. Yet, with
some directed Socratic dialogue, most students come around to the “lost volume” measure of
apply?
Remedies for Breach of Sales and Lease Contracts
Buyer and Lessee Remedies
Right to Recover Goods from an Insolvent Seller or Lessor – If the buyer or lessee makes a
partial or full payment for the goods before they are received, and the seller or lessor becomes
Contemporary Environment: Buyer’s and Lessee’s UCC Right to Cover
The buyer or lessee may cover by purchasing or renting substitute goods if delivery is not made
contract.
Right to Cancel a Contract – The buyer or lessee may cancel the contract if they receive
Right to Recover Damages for Accepted Nonconforming Goods – Acceptance does not
Additional Performance Issues
Statute of Limitations – The UCC calls for all actions based on contracts to be commenced
within four years.
Agreements Affecting Remedies – The UCC allows for the parties to a contract to agree to
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breach.
Ethics: UCC Doctrine of Unconscionability
The doctrine of unconscionability says that if a contract is unconscionable, the court may either
refuse to enforce the contract or limit the application of the unconscionable clause.
V. Key Terms and Concepts
Acceptance—Occurs when a buyer or lessee takes any of the following actions after a
adequate assurance of performance from the other party if there is an indication that the
Breach—Failure of a party to perform an obligation in a sales or lease contract.
Buyer’s or lessee’s cancellation—A buyer’s or lessee’s right to cancel a sales or lease
referred to as capture.
Cover—The UCC version of mitigation of damages.
Damages—A buyer or lessee may recover damages from a seller or lessor who fails to deliver
learned of the breach.
Destination contract—A sales contract that requires the seller to deliver conforming goods to
Express terms—Generally, the common law of contracts only obligates the parties to perform
their contracts according to the express terms of their contract.
commissions, and so on.
Installment contract—A contract that requires or authorizes goods to be delivered and
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passes to the buyer or lessee.
Right to reject non-confirming goods or improperly tendered goods—The right of a buyer or
lessee to reject goods that do not conform to a contract.
Right to replevy goods—A buyer or lessee has the right to replevy (recover) goods from a
buyer or lessee upon breach of a sales or lease contract by the buyer or lessee or the
insolvency of the buyer or lessee.
Shipment contract—A sales contract that requires the seller to send the goods to the buyer,
but not to a specifically named destination.
accordance with the sales contract.
UCC statute of limitations—A rule that provides that an action for breach of any written or
Unconscionability—To prove unconscionability, there must be proof that the parties had
cease manufacturing the goods and resell them for scrap or salvage value, or (2) to complete
the manufacture of the goods and resell, release, or otherwise dispose of them to another
party.