Remedies for Breach of Sales and Lease Contracts
Sellers and Lessors Performance
Tender of Delivery -- requires the seller or lessor to:
- put and hold conforming goods at the buyers or lessee's disposition
- give the buyer or lessee any notification reasonably necessary to enable the buyer or lessee to take delivery of the goods
Place of Delivery
- agreement -- the parties may agree in the sales or lease contract as to the place a delivery
- no agreement -- if there is no agreement in the contract as to the place of delivery, the following UCC rules apply:
- noncarrier cases -- the place of delivery is the sellers or lessor's place of business, unless the seller or lessor has no place of business, in which case the place of delivery of the sellers or lessor's residence
- carrier cases:
- shipment contracts -- the sales contract requires the seller to send goods to the buyer by carrier. Delivery occurs when the seller puts the goods in the carrier's possession
- destination contracts -- the sales contract requires the seller to deliver the goods to the buyers place of business or other destination. Delivery it occurs when the goods reach this destination
Perfect Tender Rule
Best seller or lessor is under a duty to deliver conforming goods to the buyer or leasee. If the goods or tender of delivery fails in any respect to conform to the contract, the buyer or leasee may opt to:
- reject the whole shipment
- accept the whole shipment
- reject part and accept part of the shipment
Exceptions to the perfect tender rule:
- agreement of the parties -- the parties may agree to limit the effect of the perfect tender rule
- substitution of carriers -- a seller must use a commercially reasonable substitute if the agreed-upon manner of delivery failes or the agreed-upon type of carrier becomes unavailable
- cure -- a seller or lessor who delivers nonconforming goods has the opportunity to cure the nonconformity by repairing or replacing defective or nonconforming goods at the time for performance has not expired and the seller or lessor notifies the buyer will leasee of his or her intention to make a conforming delivery within the contract time
- installment contracts -- the buyer or lessee may reject any nonconforming installment if the value of the installment is in payer in the defect cannot be cured. The buyer Alessi may reject the entire contract upon the tender of a nonconforming installment only if the nonconformity substantially impairs the value of the entire contract
- destruction of goods -- if goods identified in the contract are totally destroyed without full of either party before the risk of loss passes to the buyer or lessee, the seller or lessor is excused from performance
General Obligations
The UCC has adopted the following broad principles that govern the performance of sales and lease contracts:
- good faith -- parties to a sales or lease contract must perform their contract obligations in good faith
- reasonableness -- many UCC provisions require parties to take reasonable steps or to act reasonably in performing contract obligations
- commercial reasonableness -- some provisions of the UCC require merchants to use commercial reasonableness in the performance of their contract obligations
Buyers and Lessee's Performance
right of inspection -- unless otherwise agreed, the buyer or lessee has the right to inspect goods that are tendered, delivered, or identified in the sales or lease contract prior to accepting or paying for them
payment -- duty to pay. Goods that are excepted by the buyer or lessee must be paid for in accordance with the terms of the sales or lease contract. Unless otherwise agreed, payment or rent is due when and where the goods are delivered
acceptance -- occurs when the buyer or lessee takes one of the following actions:
- signifies in words or by conduct that the goods are conforming or that the goods will be taken or retained despite their nonconformity
- fails to reject the goods within a reasonable time after their delivery by the seller or lessor
- packs inconsistently with the seller's ownership rights in the goods
Buyers and lessees may only accept delivery of a commercial unit.
Seller's and Lessor's Remedies
Right to withhold delivery -- delivery of goods may be withheld if the seller or lessor discovers that the buyer or leasee is insolvent before the goods are delivered.
Demand payment in cash. -- if the seller or lessor discovers that the buyer or leasee is insolvent, he or she may refuse to deliver the goods unless payment is rendered in cash.
right to stop delivery of goods in transit -- if the goods are in transit or in the bailee's possession, the seller or lessor may stop delivery of a car load, a truckload, or a planeload of goods if the buyer or lessee repudiates the contract, fails to make payment when due, or otherwise breaches the contract war of any size shipment if the buyer or lessee becomes insolvent
right to reclaim goods -- a seller or lessor may reclaim goods in the possession of the buyer or lessee if:
- the goods are delivered in a credit sale and the seller then discovers that the buyer was insolvent
- the buyer misrepresented his or her solvency in writing within three months before delivery or paid for goods in a cash sale with a check that bounces
right to dispose of goods -- if a buyer or lessee breaches or repudiates the sales or lease contract before the seller or lessor has delivered the goods, the seller or lessor may resell or release the goods and recover damages from the buyer or leasee. Damages are calculated as the difference between the disposition price or rent and the original contract price or rent
right to recover the purchase price or rent -- if the buyer or lessee accepts the goods but fails to pay for them when the contract price or rent is due, the seller or lessor may sue to recover the contracted for purchase price or rent from the buyer or leasee
right to recover damages for breach of contract -- if a buyer or lessee repudiates a sales or lease contract, the seller or lessor may sue to recover the damages caused by the breach. Damages are calculated as the difference between the original contract price or rent in the market price or rent of the goods at the time and place the goods were to be delivered, or lost profits
right to cancel the contract -- the seller or lessor may cancel the sales or lease contract if the buyer or lessee breaches the contract. The seller or lessor is discharged of any further obligations under the canceled contract
Buyer's and Lessee's Remedies
seller or lessor refuses to deliver the goods or delivers nonconforming goods leasee does not want
- reject nonconforming goods -- if the goods or the sellers were Lester's tender of delivery fails to conform to a sales or lease contract in any way, the buyer or lessee may:
- reject the whole
- accept the whole
- accept any commercial unit and reject the rest
- revoke acceptance of nonconforming goods -- a buyer or leasee who has accepted goods may subsequently revoke his or her except instead if:
- the goods are nonconforming
- the nonconformity substantially impairs the value of the goods to the buyer or lessee
- and one of the following factors are shown:
- the sellers or Luster's promise to reasonably cure the nonconformity is not met
- the goods were excepted before the nonconformity was discovered in the nonconformity was difficult to discover
- the goods were excepted before the nonconformity was discovered and the seller or lessor assured the buyer or leasee at the goods were conforming
- cover -- if the seller or lessor fails to make delivery of goods or repudiates a sales or lease contract or if the buyer or leasee rightfully rejects the goods or justifiably revoked acceptance, the buyer or leasee may cover the purchasing or renting substitute goods from another party. The buyer or leasee may recover from the seller or lesser damages calculated as the difference between the costs of cover and the original contract price or rent
- sue for breach of contract and recover damages -- if a seller or lessor fails to deliver the goods or repudiates a sales or lease contract, the buyer or lessee may recover damages from the seller or lessor. The images are calculated as the difference between the contract price or original rent and the market price or rent at the time the buyer or lessee learned of the breach
- canceled the contract -- a buyer or lessee may cancel a sales or lease contract if the seller or lesser fails to deliver conforming goods or repudiates the contractor if the buyer or leasee rightfully rejects the goods are justifiably revokes acceptance of the goods. The buyer or leasee is discharged from any further obligations under the canceled contract
seller or lessor tenders nonconforming goods and buyer or lessee accepts them
- sue for damages -- if a buyer or lessee except nonconforming goods from the seller or lessor, the buyer or leasee may recover as damages any loss resulting from the sellers or lessors breach
- deduct damages from unpaid purchase price or rent -- if a seller or lessor breaches the sales or lease contract and the buyer or leasee accepts nonconforming goods, the buyer or leasee may deduct all or any part of the damages resulting from the breach from any part of the price or rent still due under the sales or lease contract
seller or lessor refuses to deliver the goods and buyer or leasee wants them
- specific performance -- if the goods are unique or the remedy at law in inadequate, a buyer or lessee may obtain a decree of specific performance that orders the seller or lessor to perform the sales or lease contract
- replevy the goods -- a buyer or lessee may replevy (recover) scarce goods from a seller or lessor who was wrongfully withholding them
- recover the goods from an insolvent seller or lessor -- if the buyer or lessee makes partial or full payment for the goods before they are received and the seller or lessor becomes insolvent within 10 days after receiving the first payment, the buyer or lessee may recover the goods from the seller or lesser
unconscionable sales and lease contracts
If a sales or lease contract or any clause and it is unconscionable, the court may either refuse to enforce the contract or limit the application of the unconscionable clause.
Additional Issues Affecting Performance and Breach
assurance of performance -- if one party to a sales or lease contract has reasonable grounds to believe that the other party either will not work cannot perform his or her contractual obligations, he or she may demand in writing an adequate assurance of performance from the other party. The party making the demand may suspend his or her performance until adequate assurance of performance is received.
anticipatory repudiation -- occurs when a party to a sales or lease contract repudiates the contract before his or her performances do. The aggrieved party can await performance when do war treat the contract as having been breached at the time of the anticipatory repudiation.
statute of limitations -- the UCC provides that an action for breach of any written or world sales or lease contract must commence within four years after the clause of action accrues. The parties may agree to reduce the limitations period to one year, but they cannot extend it beyond four years
agreements affecting remedies
- limitations on remedies -- the parties to a sales or lease contract may agree on remedies in addition to war in substitution for the remedies provided by article 2 or 2A of the UCC
- unconscionable limitations -- any agreement concerning the limitation or exclusion of damages that is found to be unconscionable is unenforceable. With respect to consumer goods, a limitation of consequential damages for personal injuries is prima facie unconscionable
- liquidated damages -- the parties to a sales or lease contract may establish an advance the damages that will be paid upon a breach of the contract
