Business Law Chapter 22 Homework Where The Buyer Rejects Nonconforming Tender Which

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Chapter 22

PERFORMANCE

A. Performance by the Seller

1. Time and Manner of Tender

2. Place of Tender

a. Shipment Contracts

b. Destination Contracts

c. Goods Held by Bailee

3. Perfect Tender Rule

a. Agreement by the Parties

b. Cure by the Seller

c. Installment Contracts

B. Performance by the Buyer

1. Inspection

2. Rejection

3. Acceptance

4. Revocation of Acceptance

5. Obligation of Payment

C. Obligations of Both Parties

1. Casualty to Identified Goods

2. Nonhappening of Presupposed Condition

3. Substituted Performance

4. Right to Adequate Assurance of Performance

5. Right to Cooperation

6. Anticipatory Repudiation

Cases in This Chapter

Wilson v. Scampoli

Furlong v. Alpha Chi Omega Sorority

Waddell v, L.V.R.V Inc.

Hessler v. Crystal Lake Chrysler-Plymouth, Inc

Chapter Outcomes

After reading and studying this chapter, the student should be able to:

Explain the requirements of tender of delivery with respect to time, manner, and place of delivery.

Explain the perfect tender rule and the three limitations on it.

Explain when the buyer has the right to reject the goods and what obligations the buyer has upon

rejection.

Explain what constitutes acceptance by the buyer and the buyer’s right to revoke acceptance.

Identify and describe the excuses for nonperformance and the Uniform Commercial Code’s provisions

for protecting the parties’ expectations of performance by the other party.

TEACHING NOTES

Performance is the carrying out of a contract’s obligations according to its terms.

The basic obligation of the seller in a contract for the sale of goods is to transfer

and deliver the goods in a way that conforms to the terms of contract. The basic

obligation of the buyer is to accept and pay for these goods in accordance with

the contract.

A. PERFORMANCE BY THE SELLER

Tender of conforming goods by the seller entitles him to acceptance of them by

the buyer and to payment of the contractually agreed-upon price.

Tender of delivery occurs when the seller obtains and holds conforming goods,

makes them available to the buyer and gives buyer reasonable noti cation and

opportunity to take delivery.

CISG — seller must deliver the goods, related documents and transfer the

interest in the goods.

*** Chapter Outcome ***

Explain the requirements of tender of delivery with respect to time, manner, and place of

delivery.

Time and Manner of Tender

Tender must be made at a reasonable time and be kept open for a reasonable

period to enable the buyer to take possession.

Place of Tender

If the contract does not specify the place for delivery of the goods, the place for

delivery is the seller’s place of business, or, if he has no place of business, his

residence. If the goods are not located at either the seller’s place of business or

his residence, the location of the goods is then the place for delivery.

CISG — unless required otherwise, seller must make goods available at the

seller’s place of business; if both parties know the goods are somewhere else,

they must be made available to the buyer at that other place.

Delivery terms can be used to specify whether the contract is a shipment or

destination contract and determine the place where the seller must tender

delivery of the goods.

Destination Contracts — The delivery terms F.O.B. city of buyer, ex-ship, and

no arrival, no sale are destination contracts. Since a destination contract requires

the seller to tender delivery of conforming goods at a speci ed destination, the

seller must make the goods available to the buyer and give him reasonable

notice to take delivery.

Perfect Tender Rule

The Code’s perfect tender rule obligates the seller to conform her tender of

*** Chapter Outcome ***

Explain the perfect tender rule and the three limitations on it.

There are three basic limitations on the perfect tender rule:

1. Agreement by the Parties —Parties may expressly limit application of the

perfect tender rule.

2. Cure by the Seller — The seller may cure or correct a nonconforming

tender of goods: a) if the original performance deadline has not elapsed, or b)

if the seller reasonably expected that the nonconforming goods would be

acceptable. Seller must reasonably notify buyer of intent to cure.

CISG — seller may cure de ciency before delivery due date, if it does not

3. Installment Contracts — Installment contracts provide that the goods be

delivered in lots. Payment may be demanded for each installment if the price

can be apportioned accordingly. Separate lots may be rejected if the goods

are nonconforming so as to substantially impair the installment’s value and

cannot be cured. If the nonconformity or default of one or more the

installment substantially impairs the value of the whole contract, the buyer

can treat it as a breach of the whole contract.

CISG — seller’s failure on any installment causes a breach for that installment. If

one installment affects future or past installments, buyer may declare whole

contract avoided.

CASE 22-1

WILSON v. SCAMPOLI

United States Court of Appeals, District of Columbia Circuit, 1967

228 A.2d 848

http://scholar.google.com/scholar_case?

q=228+A.2d+848&hl=en&as_sdt=2,34&case=8847954677255207423&scilh=0

Myers, J.

This is an appeal from an order of the trial court granting rescission of a sales contract for a color

television set and directing the return of the purchase price plus interest and costs.

Appellee [Wilson] purchased the set in question on November 4, 1965, paying the total

purchase price in cash. The transaction was evidenced by a sales ticket showing the price paid

and guaranteeing ninety days’ free service and replacement of any defective tube and parts for a

period of one year. Two days after purchase the set was delivered. * * * When the set was turned

on, however, it did not function properly, the picture having a reddish tinge. Appellant’s

[Scampoli’s] delivery man advised the buyer’s daughter, Mrs. Kolley, that it was not his duty to

tune in or adjust the color but that a service representative would shortly call at her house for that

purpose. After the departure of the delivery men, Mrs. Kolley unplugged the set and did not use

it.

seasonably notifies the buyer have a further reasonable time to substitute a conforming

tender.

A retail dealer would certainly expect and have reasonable grounds to believe that

merchandise like color television sets, new and delivered as crated at the factory, would be

acceptable as delivered and that, if defective in some way, he would have the right to substitute a

conforming tender. The question then resolves itself to whether the dealer may conform his

tender by adjustment or minor repair or whether he must conform by substituting brand new

merchandise. The problem seems to be one of first impression. * * *

B. PERFORMANCE BY THE BUYER

A buyer is required to accept conforming goods and to pay for them according to

the contract terms, but is not required to accept a tender or delivery of

nonconforming goods.

CISG — buyer must pay the price and take delivery of the goods per the

contract.

Inspection

Usually, the buyer has a right to inspect the goods before payment or

acceptance, in order to determine whether the goods conform to the contract.

The inspection must be within a reasonable time.

CISG — buyer is not bound to pay until he has had time to inspect goods (as

short a time as is reasonable), unless otherwise agreed. Buyer must promptly

give notice of any nonconformity.

*** Chapter Outcome ***

Explain when the buyer has the right to reject the goods and

what obligations the buyer has upon rejection.

Rejection

Rejection is a manifestation by the buyer of unwillingness to accept goods.

Rejection of nonconforming goods or tender is rightful under the perfect tender

CASE 22-2

FURLONG v. ALPHA CHI OMEGA SORORITY

Bowling Green County Municipal Court, 1993

73 Ohio Misc.2d 26, 657 N.E.2d 866

http://scholar.google.com/scholar_case?case=13710936984230391946&q=657+N.E.2d+866&hl=en&as_sdt=2,34

Bachman, J.

[Alpha Chi Omega (AXO) entered into an oral contract with Furlong to buy 168 “custom

designed” sweaters for the Midnight Masquerade III. The purchase price of $3,612 was to be

paid as follows: $2,000 down payment when the contract was made and $1,612; upon delivery.

During phone conversations with Furlong, Emily, the AXO social chairperson, described the

design to be imprinted on the sweater. She also specified the colors to be used in the lettering

the navy blue outline, reducing the number of colors from three to two, changing the maroon

lettering to red, and changing the color of the masks from hunter green to red. Upon delivery,

AXO gave a check to Furlong’s agent for the balance of the purchase price. Later that day, Emily

inspected the sweaters and screamed her dismay at the design changes. AXO immediately

* * *

Furlong and Emily created an express warranty by * * * affirmation of fact (his initial phone

calls); by sample (the maroon sweater); by description (the fax). This express warranty became

part of the contract. Each of the three methods of showing the express warranty was not in

conflict with the other two methods, and thus they are consistent and cumulative [UCC §2–317],

and constitute the warranty.

The design was a “dickered” aspect of the individual bargain and went clearly to the essence

of that bargain [UCC §2–313]. Thus, the express warranty was that the sweaters would be in

accordance with the above design (including types of colors for the letters and the mask, and the

* * *

The sweaters did not conform to the contract (specifically, the express warranty in the

contract). Thus (in the words of the statute), the sweaters did “fail in any respect to conform to

the contract.” Actually, the sweaters failed in at least five respects [UCC §2–601]. * * * they

were a nonconforming tender of goods [UCC §2–601].

* * *

AXO, as the buyer, had the right to inspect the boxes of sweaters before payment or

acceptance [UCC §2–513]. AXO did so at a reasonable time and place, and in a reasonable

* * *

According to the statute, “if the goods * * * fail in any respect to conform to the contract, the

buyer may: (A) reject the whole * * * [.]” [UCC §2–601]. As concluded above, the sweaters

were nonconforming goods. Therefore, Furlong breached the contract, and AXO had the right to

reject the goods (sweaters).

* * *

One [section of the] statute provides: “Rejection of goods must be within a reasonable time

after their delivery. * * * It is ineffective unless the buyer seasonably notifies the seller.” [UCC

§2–602(1)]. AXO did what this statute requires.