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CHAPTER 21
PERFORMANCE OF SALES CONTRACTS
I. OBJECTIVES:
This chapter builds on the previous two chapters in which the formation and basic terms of sales
contracts, including warranties, are discussed. This chapter deals with the performance of
contracts, including interpretation, modification, basic duties, rights when performance is
defective, and excuse. After reading the chapter and attending class, a student should be able to:
pertain to the performance of sales contracts.
payment for goods.
rights to cure a defective delivery.
will perform its obligations.
6. Evaluate when a party will have its performance excused on the grounds of commercial
impracticability.
II. ANSWER TO INTRODUCTORY PROBLEM
A. The first question following the introductory hypothetical asks whether the buyer has the
right to inspect the vehicle that had been shipped to her. The general rule is that the buyer
terms may have been spelled out on the seller’s web page.
B. The second question asks whether the buyer would have the right to refuse to accept the
vehicle if she found that it had scratches on it and did not conform to the contract
C. The third question asks whether the buyer would have the right to revoke acceptance where
she originally accepted the vehicle when the dealer offered her a monetary allowance and—
where after discovering subsequent defects, she gave the dealer repeated opportunities to
remedy them. A buyer may revoke or undo acceptance of non-conforming goods where the
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defects before invoking her right to revoke the acceptance by returning the car to the
dealer and requesting another vehicle or her money back.
D. The fourth question asks whether it would be ethical for a dealer to deliver goods that the
dealer knows do not conform to the contract and have been damaged. This is an “ethical
III. SUGGESTIONS FOR LECTURE PREPARATION:
A. General Rules
1. Explain the general rules of performance of a sales contract, especially the obligation of
good faith, which is a statutory attempt to instill high ethical values in parties to the
contract.
Example: Problem Case #2.
to be treated? The students should also try to identify those factors whose presence, perhaps
in levels of increasing intensity, militate for relieving a person of his legal obligation or
2. Note the importance of course of dealing and usage of trade in the interpretation of
contracts.
at issue.
protect your interests?
3. Relate the sales contract modification rules to the writing requirement of the Code’s
statute of frauds. Recall that the Code’s statute of frauds is covered in Chapter 15.
Cyberlaw in Action: The Internet and E-Commerce Facilitate Contract Modifications
(page 605): Note and discuss how the Internet and e-commerce facilitate contract
modifications.
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5. Explain the rule concerning assignment of contract rights and delegation of contract
duties. These are discussed in Chapter 17.
B. Delivery
1. General. Begin the discussion of the rules concerning delivery, inspection, payment,
conforming. Therefore, revocation of acceptance is difficult. Rather than set the
nonconformance.
2. Delivery. State the seller’s basic duty of delivery. Note the place of delivery for the
there is a shipment contract.
Example: Problem Case #3.
C. Inspection and Payment
1. Point out the buyer’s basic right to inspect the goods before acceptance or payment. Note
the importance of this right of inspection: to quickly and cheaply (for the buyer) avoid
Example: Problem Case #2
The Global Business Environment: Assurance of Payment (page 607 and Figure 1 on
page 608): Discuss the concerns that buyers and sellers have concerning the when
D. Acceptance, Revocation and Rejection
1. Define when acceptance of a delivery occurs, being sure that students do not confuse this
acceptance with the acceptance of an offer to make a contract. Note that once the goods
and had the painting cleaned and repaired by a conservator, the dealer was considered to
have accepted the painting and was liable to the seller for the agreed-upon purchase price.
Additional Examples: Problem Cases # 4, 5 and 6.
2. Discuss the concept of a commercial unit and provide a number of examples. Note that a
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3. Revocation. Distinguish revocation of acceptance from rejection. Explain why it is more
difficult to revoke acceptance than it is to reject the goods. Discuss some of the critical
Waddell v. L.V.R.V. Inc. ( p. 610). Where buyers of an R.V. discovered
nonconformities shortly after purchase and allowed the seller opportunity to cure,
subjective value of the R.V. to the buyers; and 2) whether the nonconformity
substantially impairs the objective value of the R.V. given the buyers’ particular
Additional Example: Problem Case #7.
4. List the buyer’s options when the seller delivers nonconforming goods. Note what must
be done to effect a timely rejection.
reported the nonconformities discovered by the valuation to the seller and
requested a refund. The court upheld the lower court’s determinations that the
those nonconformities.
5. Discuss the duties the buyer has concerning rejected goods. Distinguish the situation
where perishable goods are involved from the situation where the goods are not
perishable. Detail the consequences of various steps the buyer takes, or fails to take.
Examples: Problem Cases #8 and 9.
E. Assurance, Repudiation and Excuse
1. Assurance. Discuss the kinds of circumstances under which a party to a contract is
The Global Business Environment: Insecurity in International Transactions (page 616):
Note how the CISG deals with insecurity and discuss the facts and result in the case
involving the German buyer and Italian shoe manufacturer.
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2. Anticipatory Repudiation. Note the alternatives open to a party to a contract when the
Rochester Gas and Electric Corporation v. Delta Star, Inc. (page 617). The defense of
commercial impracticability was not available to a seller where the price of steel to be
used in the equipment it had contracted to manufacture and sell had increased, but the
steel was still available, albeit it at a much higher price. Accordingly, the seller was not
that had been agreed to.
IV. RECOMMENDED REFERENCES:
See the references listed in Chapter 19, Formation of Sales Contracts.
V. ANSWERS TO PROBLEMS AND PROBLEM CASES:
still had some value to the growers at the time the owner decided to reject, waiting to release the
[potatoes until after that value disappeared was a breach of the contract. Cavendish Farms, Inc. v.
Mathiason Farms, Inc., 2010 WL5071553 (Sup. Ct. N.D. 2010).
2. Yes. Under 2-513, the buyer has the right to inspect the goods before payment or acceptance.
damages sustained. Spada Distributing Co. v. Belson, 26 A.D. 88 (1967)(United States Dept. of
Agriculture).
4. When delivered goods do not conform to the contract, the buyer may: (1) reject the whole; (2)
accept the whole; or (3) accept any commercial units and reject the rest. Acceptance of any part
Sup. Jud. Ct. 1981).
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6. Yes. Maxwell Shoe cannot claim that it rejected the shipment. If a buyer treats a shipment of
The court stated that altering or repairing defects is inconsistent with the seller’s ownership of the
7. No. In ascertaining whether a buyer’s continued use of an item after revocation of its acceptance
was reasonable, the critical questions are: (1) On being apprised of the buyer’s revocation of her
latter for the dissatisfaction and inconvenience that the defects caused him? (4) Did the seller act
in good faith? (5) Was the seller unduly prejudiced by the buyer’s continued use? Here, the
that the defects were remediable, thus inducing her to retain possession. And, finally, the seller
was not prejudiced by McCullough’s continued operation of the vehicle. Swad did not reassume
8. Yes. Traynor acted exactly as he should have when he received the shipment of trees that
the trees, including rental of a lot and wages for a night watchman and a salesman.
9. No. The court held that Fekkos had met his duty to use reasonable care to protect the
tractor after he had rightfully rejected it and pending an opportunity for the seller to
Ohio 1986).
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10. The court held that Creusot-Loire’s request for assurance was reasonable under the
circumstances. Coppus was obligated to provide burners which would operate under
Engineering Corp., 535 F. Supp. 45 (S.D.N.Y. 1983).