UCC Performance

Question 1

What is a seller’s obligation under the UCC?

Answer 1

To transfer and deliver the goods sold

Question 2

What are carrier cases?

Answer 2

When the parties to a contract agree to use a specified common carrier (transporter) to deliver goods.

Question 3

When does the risk of loss transfer from the seller to the buyer in:1. Shipment contracts? 2. Destination contracts?

Answer 3

Risk of Loss in Carrier Cases:
1. Shipment K’s: Risk of loss transferred to buyer once seller delivers goods to common carrier
2. Destination K’s: Risk of loss transferred to buyer when goods are tendered at the destination

Question 4

What does “FOB seller’s place of business” mean? (seller’s point of origin)

Answer 4

It is a shipment K: risk of loss passes to buyer once seller delivers goods to common carrier and arranges for their shipment.

Question 5

What does “FOB buyer’s place of business” mean?

Answer 5

It is a destination contract: risk of loss passes to the buyer after the goods are tendered at the destination point

FOB = “Free on Board”

Question 6

What are non-carrier cases?

Answer 6

When the parties do not agree to use a common carrier to deliver goods.

Question 7

In non-carrier cases, who bears the risk of loss (ROL)?

Answer 7

1. If seller is not a merchant: ROL passes to the buyer upon tender of delivery. Only tender of delivery is required, not actual receipt by the buyer
2. If seller is a merchant: ROL passes to buyer when the buyer physically takes possession of the goods

⚠️ Note: Risk of loss can also be specified in the K, or borne by the breaching party if there is a breach

Question 8

When can a party request an assurance of performance?

Answer 8

If anticipatory repudiation cannot be established but there are reasonable grounds for insecurity

Question 9

When can a party suspend performance after failing to receive adequate assurances?

Answer 9

If the other party does not respond:1. To the demand within a reasonable time (30 days under the UCC); or 2. In a way that provides reasonable assurances

UCC § 2-609

Question 10

What is the perfect tender rule?

Answer 10

Requires absolute perfect tender of goods as specified in the contract

⚠️ Does not apply to installment contracts or when parties agree otherwise

Question 11

What happens if the buyer does not properly reject the nonconforming goods? (after a reasonable opportunity to inspect)

Answer 11

The nonconforming goods will be deemed accepted

Question 12

Once the buyer accepts the nonconforming goods, what can the buyer do?

Answer 12

1. Pay the contract price of those goods; and 2. Seek damages for any nonconformity if the seller is notified

Question 13

Upon receipt of nonconforming goods that violate the perfect tender rule, what are a buyer’s 3 options?

Answer 13

The buyer must inspect the goods, and “if the goods or tender of delivery fail in any respect to conform to the contract, the buyer may:
1. Reject the whole; or
2. Accept the whole; or
3. Accept any commercial unit or units and reject the rest.

UCC § 2-601jklvbn

Question 14

After delivering a shipment of nonconforming goods under the perfect tender rule, under what circumstances will the seller have a right to cure?

Answer 14

1. Before the window for performance on the K has elapsed, so long as the seller gives the buyer notice of the intent to cure; or
2. If the seller reasonably thought that buyer would accept the nonconforming goods, the seller may substitute a conforming delivery, so long as the seller gives the buyer notice of their intent to cure and cures within a reasonable time

UCC § 2-508(1)

Question 15

What are the requirements for a breaching seller to cure an imperfect tender?

Answer 15

1. The seller must give the buyer reasonable notice;
2. The seller must tender conforming goods within the contract time
   * Unless the seller had reasonable grounds to believe the buyer would accept the imperfect tender, in which case the seller has a reasonable time to cure the breach.

UCC § 2-508

Question 16

Can a buyer force the seller to cure?

Answer 16

No

Question 17

When can a buyer reject nonconforming goods?

Answer 17

Only if:1. The buyer has not previously accepted the goods (UCC § 2-606(1)); and 2. The buyer has given notice to the seller that she is rejecting within a reasonable time after delivery (UCC § 2-602(1))

Question 18

What constitutes a buyer’s acceptance of nonconforming goods?

Answer 18

A buyer has accepted the goods if, after a reasonable time to inspect the goods, the buyer signifies acceptance by:
1. Telling seller that the goods comply with the contract;
2. Taking the goods despite their non-conformity;
3. Not making a valid rejection of the goods;
4. Taking action inconsistent with the seller still owning the goods;

UCC § 2-606(1)

Question 19

If a buyer accepts nonconforming goods, under what circumstances can the buyer then later revoke their acceptance and reject the nonconforming goods?

Answer 19

The buyer may revoke her acceptance within a reasonable time after discovering the grounds for revocation (i.e. the fact that the shipment was not a perfect tender), and before there’s any substantial change in the goods’ condition (unless the change in condition is due to the goods’ own defects). To be effective, the buyer must notify the seller of the revocation.

UCC § 2-608

Question 20

What are the 3 UCC implied default warranties for the sale of goods?

Answer 20

Warranty of:1. Title 2. Merchantability 3. Fitness for a particular purpose

Question 21

What is the warranty of merchantability, and when does it apply?

Answer 21

The warranty of merchantability guarantees that the goods are fit for the ordinary purpose for which they would be used. It applies only if the seller is a merchant.

UCC § 2-314

Question 22

In a K for the sale of goods where the seller is a merchant, how can the seller disclaim the implied warranty of merchantability?

Answer 22

By: 1. Expressly disclaiming the warranty, using the word “merchantability” in the contract in conspicuous writing (if written); or 2. Using language or circumstances that are reasonably understood to exclude the warranty of merchantability * Examples: “As is” written into the contract, or if there are patent (obvious) defects

Question 23

What is the warranty of fitness for a particular purpose, and when does it apply?

Answer 23

The warranty of fitness for a particular purpose guarantees that the goods are fit for the particular purpose for which the buyer intends to use them.
It only applies when seller has reason to know: 1. The particular purpose for the goods; and 2. That the buyer is relying upon the seller’s skill to select goods reasonably fit for that purpose

UCC § 2-315

Question 24

When is the implied warranty of fitness for a particular purpose negated?

Answer 24

When:1. There is a written disclaimer that is clear and conspicuous, or 2. The goods have patent defects that were easy to detect

Question 25

What is an express warranty?

Answer 25

• An affirmation of fact or promise or description of the goods made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain; or* Sample or model made as part of the basis of the bargain that creates an expectation the item will conform to the sample or model

UCC § 2-313(1)

Question 26

Can you limit recovery for breach of warranty?

Answer 26

Typically yes, unless unconscionable.