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Add. Info.: Open Payment Term—If the parties do not specify terms of payment, it is due in
full at the time and place where the buyer receives the goods. 2-310(a) If unspecified, payment
can be made in any manner used in the ordinary course of business, including check or credit
card. If the seller demands cash, the buyer must be given a reasonable time to secure it. 2-511(2)
PERFORMANCE AND OBLIGATIONS—The general duties and obligations assumed by
each party to a contract for the sale of goods include those duties and obligations specified by the
contract, imposed by the UCC, and, where necessary, provided by trade custom.
Add. Case: Daughtrey v. Ashe (Sup. Ct., Va., 1992)--Ashe, a jeweler, sold Daughtrey a bracelet
for $15,000. On an appraisal form (for insurance) Ashe listed the value as $25,000 and stated
that the diamonds were of a certain quality. Daughtrey later found out the diamonds were of a
lower quality and demanded specific performance, not a refund, since diamonds had risen in
value. Trial court held that the particular quality of the diamonds was not a condition of the
sale. Daughtrey appealed.
Decision: Reversed for Daughtrey. Ashe’s statements about the quality of the diamonds are a
Seller’s Rights and Obligations—The seller must transfer and deliver conforming goods to the
buyer. Obligations include the appropriate manner and timeliness of delivery, and the place and
quality of tender.
Tender--Under the common law perfect tender rule, the seller’s tender of delivery was required
to conform in detail to the terms of the agreement. The buyer could reject the delivery or accept
it. The UCC restates the rule to provide that the buyer may (a) reject the whole; (b) accept the
whole; or, (c) accept part and reject the rest. 2-601 Buyers are entitled to receive those goods
they have bargained and paid for and not something less. However, the UCC provides three
modifications to the buyer’s right to reject the goods for failure to comply. By contract, the
parties may agree to limit the operation of the perfect tender rule.
Right to Cure by the Seller—The UCC provides opportunities for a seller to cure an improper
tender rejected by the buyer. After the buyer rejects a shipment for not conforming to the
contract, the seller may cure if: (1) The time for the seller’s performance under the contract has
not yet passed; (2) The seller notifies the buyer in a timely manner of an intent to cure the defect;
and (3) The seller properly repairs or replaces the defective goods within the time allowed for his
performance. 2-508(1)
Add. Case: Ramirez v. Autosport (Sup. Ct., NJ, 1982)--On July 20, the Ramirez contracted to
buy a van from Autosport. The Ramirez agreed to turn in their old van immediately and to take
delivery of the new van on Aug. 3. On Aug. 3 the new van was not ready. It had scratches and
damaged parts. Autosport agreed to fix the problems by Aug. 14, but then the van was not ready.
Delivery was then set for Sept. 1, but again the van was not ready. In October, the Ramirez
returned with their attorney, canceled the contract, and demanded the return of their old van, but
Autosport had sold it. Ramirez sued for rescission of the contract and recovery of the value of
their old van. Autosport counterclaimed for breach of contract. The trial court found for
Ramirez; Autosport appealed.
Decision: Affirmed. The Ramirez properly rejected the new van despite Autosport’s efforts to
cure defects. The UCC permits a buyer who rightfully rejects goods to cancel a sales contract.
Add. Info.: With buyers’ consent, sellers can have extra time to cure beyond the time for
performance. For the seller to establish a right to cure after the time allowed for performance,
Article 2 requires the seller to have reasonable grounds to believe the nonconforming goods
would be acceptable to the buyer. In such cases, the sellers may offer the buyer a discount for
taking nonconforming goods.
Buyer’s Rights and Obligations—The buyer is required to accept conforming goods, and to
pay for them according to the contract. The decision to accept or reject the goods dictates how
the seller will continue to perform. If the buyer accepts, the seller awaits payment. If the buyer
rejects as nonconforming, the seller may need to remedy the problem.
Buyer’s Right of Inspection—Unless the parties have otherwise agreed, the buyer has a right to
inspect the goods before accepting or paying for them. 2-513(1)
Buyer’s Right of Rejection—A buyer who receives non-conforming goods may reject them and
withhold payment. The buyer may also cancel the contract and recover from the seller any
prepayments made. The buyer must notify the seller of a rejection in a timely manner to allow
the seller to cure or reclaim the goods. 2-601(a)
Add. Case: Carmichael & Carmichael v. Nicholstone Co. (Ct. App., Tenn.,
1993)--Carmichael made educational tapes. It contracted with Nicholstone for cassettes and
accompanying written materials. Before delivery, Carmichael requested mock-ups. On later
orders, it did not request mock-ups and did not inspect later shipments. A year later, Carmichael
discovered that binders were mislabeled. Carmichael called Nicholstone, which offered paste-on
patches at its expense. Carmichael rejected this and demanded a refund. Nicholstone refused;
Carmichael sued. The trial court found that Carmichael had revoked acceptance of the binders
in a timely manner and awarded $10,000. Nicholstone appealed.
Decision: Reversed. The buyer’s revocation was ineffective. While the UCC does not require a
buyer to inspect goods, Article 2, by implication, includes an obligation to inspect and to accept
or reject goods within a reasonable time after delivery. If a buyer does not inspect goods before
Buyer’s Duty of Acceptance—When the seller has tendered conforming goods properly, the
buyer has the duty to accept them. The buyer may notify the seller, pay for the goods, use the
goods, or simply put the goods into inventory. 2-606; 2-607
Add. Info.—Accepting goods from the seller imposes several obligations on the buyer.
Acceptance obligates the buyer to pay the seller at the contract rate. By accepting, the buyer is
precluded from rejecting the goods; but, the buyer may revoke acceptance later if nonconformity
is discovered. The nonconformity must have been difficult to discover on inspection and
substantially impair the value of the goods. Substantial impairment depends on the
circumstances of the transaction. Done properly, such revocation provides the buyer with
virtually the same rights as if the goods had been rejected.
Obligation of Payment—Unless otherwise agreed then, payment is due at the time and place at
which the buyer actually receives the goods. Payment upon receipt gives the buyer a chance to
inspect the goods before paying for them. 2-507
SALES WARRANTIES—In general, a warranty is a representation by a seller that goods being
sold conform to the specified standards of quality, safety, performance and title. If the goods then
do not conform to the warranty standards, the seller can be liable for damages. Article 2 provides
5 warranties.
Add. Case: Hoover Universal v. Brockway Imco (4th Cir., 1987)--Imco sold Hoover equipment
for $3.5 million to make plastic bottles. Handouts about the machines incorrectly overstated
production capability. The contract stated that since Hoover had inspected the equipment and
become familiar with it that there were no warranties. Hoover later discovered the lower
production capability and sued for breach of warranty and fraud. Trial court held that the
warranty disclaimer clearly eliminated these charges. Hoover appealed.
Decision: Affirmed. The warranty term was specifically written to this contract; it was not
boilerplate. The mistake in the handout was a mistake, not fraud. The buyer had plenty of chance
Warranty of Title—Is a promise that the seller is the rightful owner of the goods sold. Article 2
overrides the common law’s implied warranty of title, and imposes an obligation of a warranty of
title. Warranties of title under Article 2 require good title and rightful transfer, the absence of any
liens or other interests, and the absence of any infringements (for example, on the trademarks or
copyrights of others). In most sales contracts these warranties of title arise automatically. 2-312
Litigation arises when a third party asserts ownership over the goods. A buyer must show that the
third party made a credible claim of ownership. Then, the buyer can show that the seller has
breached a warranty of title.
Add. Case: Jefferson v. Jones (Ct. App., Md., 1979)--Jefferson bought a motorcycle from Jones,
who signed his title. The state issued title in Jefferson’s name. Two years later, the police asked
Jefferson to prove ownership. They believed the cycle had been stolen. The vehicle ID number on
the title did not match the number on the motorcycle and police seized it. Jefferson sued the
police to get it back and won because no other person could be found with a superior title.
Jefferson demanded that Jones reimburse him for legal expenses. Jones refused; Jefferson sued
for breach of warranty of title under the UCC. The trial court found that no breach occurred
because Jefferson had failed to prove that someone else had superior title. Jefferson appealed,
arguing that the disruption in use and enjoyment of the cycle by a seemingly genuine claim of
superior title was sufficient to breach the warranty of title.
Decision: Reversed. Warranty of title provided by section 2-312 does not require proof of a
Express Warranties—An express warranty is created by a seller’s promise as to the quality,
safety, performance, or title to the goods being sold. Article 2 provides three circumstances
where an express warranty may be created:
1. Seller’s confirmation or promise of fact made to the buyer regarding the goods.
2. Seller’s description of the goods provided to the buyer.
3. Seller’s sample or model of the goods. 2-313
Note that the seller’s intentions are irrelevant in determining whether the statements or actions
create an express warranty of quality.
Add. Case: Wendt v. Beardmore Suburban Chevrolet (Sup. Ct., Neb., 1985)--GM
repossessed cars from a dealership and sold them to other dealers. The Chevy in question, which
Beardmore bought, had been wrecked and repaired. GM did not reveal the car’s history to
Beardmore, which sold the car “as is” as a demo. After Wendt bought the car, problems
indicated it had been in a wreck. He sued for breach of express warranty on two bases: 1) the
car was sold as new and 2) it was sold as not having been wrecked. Trial court dismissed; Wendt
appealed.
Decision: Affirmed. UCC 2-313 provides “‘Any description of the goods which is made part of
the basis of the bargain creates an express warranty that the goods shall conform to the
description.’ Since an express warranty must have been ‘made part of the basis of the bargain,’ it
is essential that the plaintiffs prove reliance upon the warranty. ... Damages in a breach of
Add. Case: Rogath v. Siebenmann (2nd Cir., 1997)--Rogath bought a painting from Siebenmann
for $570,000. “In the Bill of Sale, Siebenmann described the provenance of the Painting and
warranted that he was the sole owner of the Painting, that it was authentic, and that he was not
aware of any challenge to its authenticity.” When Rogath sold the painting three months later for
$950,000, the new buyer challenged its authenticity and demanded a refund. Rogath sued
Siebenmann for breach of contract, breach of warranty, and fraud. The trial court granted
summary judgment for $950,000 damages to Rogath for breach of warranty. Siebenmann was
unsure of the provenance of the painting and knew that its authenticity was unclear. Other claims
dismissed due to “full recovery” on warranty claim. Both parties appealed.
Decision: Remanded. UCC 2-313 provided that “any description of the good which is made part
of the basis of the bargain creates an express warranty that the goods shall conform to the
description.” Siebenmann knew there were questions about the painting. There is conflicting
Implied Warranties—A minimum quality standard imposed by operation of law. In the sale of
goods, implied warranties are imposed by Article 2; it exists regardless of whether it is written
into the sales contract. Article 2 provides two implied warranties of quality: (1) An implied
warranty of merchantability; and (2) An implied warranty of fitness for a particular purpose.
Implied Warranty of Merchantability—Unless the parties expressly agree otherwise, an implied
warranty of merchantability accompanies every sale by a merchant. Article 2 imposes an
obligation on the merchant/seller that the goods are reasonably fit for the purposes for which
they are being sold. It also requires that they be of fair, average, merchantable quality. 2-314
Add. Case: Edwards v. Hyundai (Ct. App., Mo., 2005)--The Edwards bought a new Hyundai in
2001. It had a six-year or 72,000 mile bumper-to-bumper warranty. The car had numerous
problems and the defects could not be cured. In 2004, the Edwards sued for breach of written
warranty and breach of implied warranty of merchantability. The trial court dismissed their suit,
holding that the statute of limitations under the Lemon Law had expired; the Edwards appealed.
Decision: Reversed and remanded. The Missouri Lemon Law does not supersede the UCC in all respects with
regard to nonconforming new vehicles. The Lemon Law, which refers only to express warranties, did not preclude
Add. Case: Jacobs v. Yamaha (Sup. Ct., Mass., 1995)--Jacobs bought a new Yamaha
motorcycle in 1983 for $5,162. The warranty stated the cycle was “free from defects in material
and workmanship” and that any authorized dealer would make needed repairs. In the first year,
Jacobs returned the cycle to the dealer 15 times with problems. The 15th time, Jacobs said he
wanted his money back; the dealer refused, so Jacobs called Yahama’s warranty department in
California. Both times he called he was told the company would get back to him, but it never did.
Jacobs sued Yamaha (the dealer had gone out of business). The jury awarded him $8,500 for
breach of implied warranty of merchantability. Yamaha appealed.
Decision: Affirmed. “Yamaha’s attempted disclaimer of implied warranties was ineffective. Any
language by which a manufacturer of consumer goods seeks to exclude or modify an implied
Add. Case: Buettner v. RW Martin & Sons (4th Cir., 1995)--Buettner worked in a commercial
laundry. One day her sweater got caught in the feed drive at the front of the ironer, which
resulted in the loss of her arm below the elbow. The laundry bought the used ironer four years
earlier from Martin, a company that bought, sold, and renovated laundry equipment. The
machine was sold “as is.” It did not have a guard to cover the feed drive roll and industry
custom was not to have such guards. Buettner sued Martin for breach of implied warranty of
merchantability. District court held for defendant. Buettner appealed.
Decision: Affirmed. Under UCC 2-314, “a warranty of merchantability is implied in every
contract for the sale of goods unless the warranty is ‘excluded or modified’” as allowed under
UCC 2-316. Martin disclaimed warranties by selling the used equipment “as is,” so there was
Add. Case: Venturelli v. Cincinnati, Inc. (1st Cir., 1988) Background: A worker had the tip of a
finger crushed in 1981 in a “plate-shearing” machine built in 1947 that was used at his place of
employment. He sued the manufacturer alleging that it had sold a defective machine in breach of
warranty of merchantability. Jury held for worker. Producer appealed.
Decision: Affirmed. “A warranty of merchantability that goods ‘are fit for the ordinary purposes
for which such goods are used’ is implied in a contract for their sale.” UCC §2-314. “The
implied warranty of fitness includes uses which are reasonably foreseeable but does not include
Add. Info.—Article 2 provides minimum requirements that goods must satisfy to be considered
merchantable:
1. Conform to Contract Description. The goods received must conform to the trade meaning of
the goods described in the contract. This requirement has been interpreted to mean fair or
average quality. The seller is not obligated to supply the highest quality of the goods described
in the contract and the buyer is not obligated to accept the lowest quality.
2. In the Case of Fungible Goods. If the goods are bulk agricultural (i.e., wheat or corn) or other
fungible commodities, they must be of “fair average quality.” Goods are fungible if one unit is
roughly identical to any other unit.
3. Fit for Ordinary Uses. To be merchantable, the goods must be fit for the ordinary purposes for
which they are used. They must be capable of performing the functions ordinarily required of
similar goods.
4. Even Kind, Quality, and Quantity. The goods must have an evenness of kind, quality, and
quantity in each unit. This is intended to protect a buyer who expects that goods sold in large
lots are inter-changeable. The buyer and seller may agree to limited variations between the
units, to the extent trade usage allows. They may also agree that the seller will replace units
exceeding specified tolerances.
5. Adequacy of Packaging and Labeling. In the event the goods are to be packaged and/or
labeled, that must be as adequate as the agreement between the parties may require.
6. Conform to Label Description. If the goods come in a container, or with a label, they must
conform to statements or promises on the label. Labeling must be accurate, even if it is not
required by the terms of the contract. This reflects the expectation of buyers that goods will not
be delivered with false representations on the package.
Issue Spotter: How Much Advice Should Retailers Give?
No doubt such suits happen, but they must be rare, as stories about them do not seem to show up
very much, and the retailers find it to their advantage to be known as being helpful. Despite the
fact that they issue advice without disclaimers, it is unlikely that they will be liable for dumb
mistakes made by a homeowner. Sales reps cannot know if you really understand the problem
and if you are handy with tools, so unless they go too far in encouraging someone to do
something pretty drastic, it is unlikely that such a warranty applies as they sell you the goods
needed to do repairs.
Implied Warranty of Fitness for a Particular Purpose—Article 2 is more demanding about a seller
who had reason to know the buyer’s particular purpose for purchasing the goods. If the buyer
relies on the seller’s skill or judgment to select the goods for that purpose, an implied warranty
that the goods are suited for that purpose is created. The goods must be intended for something
more specific than the general purpose for which they were made. 2-315
Add. Info.: Conflicting Warranties—A single sales contract between a buyer and a seller may
involve several warranties. While such warranties are generally compatible, there are cases
when they are inconsistent or even in conflict with one another. In such cases, the UCC provides
that the warranties will be construed as consistent and cumulative wherever possible. 2-317
Warranty Disclaimers—Under Article 2, a seller can exclude any express or implied warranty,
limit the time period in which a warranty is to be effective, or limit the buyer’s remedies for
breach of warranty. How a warranty can be limited or excluded is defined specifically.
CASE: Lee v. R&K Marine—Lee bought a new boat from R&K. It was clearly sold with a
warranty disclaimer. Three years later, the boat had fallen apart. The maker was out of business,
so Lee used the marina that sold him the boat. Trial court granted R&K summary judgment. Lee
appealed.
Decision: Affirmed. The UCC allows warranties to be disclaimed so long as it is conspicuous.
Question: 1. There was no evidence that the retailer knew the boat was junk, but suppose that
could have been shown. How might that have changed the case?
Then there may have been a suit for fraud, which is a different matter and there could have been
2. Would there be any reason to sue the boat manufacturer?
No, it was bankrupt (for good reason); no sense wasting money on litigation when there are no
Add. Case: Bimini Boat Sales v. Luhrs Corp. (App. Div., NY, 2010)--Bimini Boat Sales bought
a fishing boat from Luhrs, a boat manufacturer, for the purpose of reselling the boat to the
public. Finding many defects, the boat needed extensive repairs before it could be made
merchantable. Bimini sued Luhrs, claiming the boat was unmerchantable and unfit for the
particular purpose of reselling to the general public. Hence, Bimini sued Luhrs for breach of
warranties and for damage to its business reputation. The trial court dismissed the suit; Bimini
appealed.
Decision: Affirmed. Bimini established a clear case entitling it to judgment to recover damages
for breach of the implied warranty of merchantability and breach of the implied warranty of
Add. Info: Disclaiming Express Warranties—The UCC intends to protect buyers from sellers
who make express warranties during negotiations between the parties and disclaim them later in
a form contract, or who put language in an agreement that creates and disclaims a warranty.
Suppose a contract said: “The digital components supplied by the seller are warranted against
defective workmanship for a period of one year.” Another clause reads: “Seller hereby excludes
all warranties, express and implied.” Article 2 directs that when possible, words or conduct
excluding or limiting an express warranty shall be interpreted as consistent with any other words
or conduct that created the warranty. If not possible to make the warranties consistent, the
disclaimer is ineffective. The express warranty exclusion in this example is inoperative because
it is not consistent with other warranty. This gives courts latitude to strike down seller’s
disclaimers. 2-316(1)
Add. Info: Disclaiming Warranties of Title—A seller can exclude or limit the warranty of title,
but only in one of two ways: (1) By specific language in the contract or (2) By circumstances
informing the buyer that the seller either does not claim full title or is selling only whatever title
he may have. These latter includes, for example, the purchase of goods at a sheriff’s sale. In such
instances, buyers know or should know that the goods have been seized to satisfy unpaid debts.
Thus, they are not the property of the party selling them. 2-312(2)
Add. Info: Disclaiming Implied Warranties—The implied warranty of merchantability can be
excluded or limited by a “conspicuous writing” that includes the word “merchantability.”
General statements may suffice as a proper disclaimer. For example: “SELLER MAKES NO
WARRANTY OF MERCHANTABILITY WITH RESPECT TO GOODS SOLD UNDER THIS
AGREEMENT” works if the seller brings it to the attention of the buyer. Language like “as is”
and “with all faults” is effective to alert the buyer that there are no implied warranties of any
kind. An implied warranty of fitness for a particular purpose can also be excluded by a
conspicuous writing. The UCC provides model language sufficient to disclaim any implied
warranty of fitness: “THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THE
DESCRIPTION ON THE FACE HEREOF.” Other language can also operate as a disclaimer if
it specifically excludes or limits an implied warranty specifically. 2-316
Add. Info: Third Party Beneficiaries of Warranties—The UCC extends any express warranty
made by the seller to third parties. It also extends the implied warranty of merchantability. All
warranty disclaimers made to the buyer by the seller also apply to third parties. However, the
seller is barred from giving a warranty to the buyer but excluding or limiting its application to
third parties. 2-318 Which third parties were to be covered by the rule generated disagreement
among the states. To minimize those concerns, three alternative versions for the imposition of
liability under Article 2 were drafted. States may choose to limit third parties to the buyer’s
family and house quests 2-314A; to any natural person 2-314B; or to any person which would
also include businesses. 2-314C
REMEDIES AND DAMAGES—When a party breaches a contract, the UCC provides the
non-breaching party with remedies to place the non-breaching party in the same position as if the
contract had been performed according to its terms. The UCC directs the courts to interpret
remedies liberally. 1-106
Seller’s Remedies—The buyer may default by rejecting a tender of goods that conforms,
wrongfully revoking an acceptance, repudiating the contract, failing to make a payment, or by
failing to complete some other performance required by the contract. The seller’s remedies
include:
1. Withholding delivery of the goods;
2. Stopping delivery by a carrier or bailee;
3. Identifying the goods to the contract, and salvaging them if necessary;
4. Reselling the goods and recovering any deficiency as damages;
5. Recovering damages for wrongful acceptance or, in some cases, recover the purchase price;
and,
6. Canceling the contract.
Add. Info: Withholding Deliveries—If the buyer wrongfully rejects goods or revokes
acceptance, fails to make a payment due on or before delivery, or repudiates the contract, the
UCC protects the seller from further loss by allowing delivery to be withheld. If the goods have
been shipped but have not been received when the buyer breaches, the seller may be able to stop
delivery of the goods by the carrier. A seller who rightfully stops delivery to a non-performing
buyer regains all original rights to the goods. 2-703(a)
