Performance and Obligations Under Sales and Leases

Chapter 23Performance and Obligations Under Sales and LeasesCopyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.23-2The Basic UCC Performance ObligationSellers and lessors are obligated to transfer and deliver conforming goodsBuyers and lessees are obligated to accept and pay for conforming goods in accordance with terms of contract“Good faith” required in performance and enforcement of every contract23-3“Good Faith”Definition: Honesty in factIn transaction between merchants, UCC also imposes obligation of reasonable commercial standards of fair dealing (“commercial reasonableness”)23-4“Perfect Tender” Rule States that if goods or tender of delivery fail in any respect to conform to contract, buyer/lessee has right to: 1) accept the goods; 2) reject entire shipment; or 3) accept part and reject part23-5Exceptions to “Perfect Tender” RuleIndustry standardsPast dealings between partiesAgreement between partiesSeller’s/lessor’s right to cureExcuse from performance when identified goods destroyed through no fault of parties“Substantial impairment” (as it relates to revocation of acceptance and installment contracts)Commercial Impracticability“Commercial Impracticability” DoctrineDelay in delivery or non-delivery may not, in court’s discretion, constitute breach if performance made impracticable because contingency has occurred that was not contemplated when parties reached agreement23-623-7Inspection, Rejection and Revocation of AcceptanceSeller/lessor must provide buyer opportunity to inspect goods“Reasonableness” governs inspection processPost-inspection, buyer has option to accept, partially accept, reject, or revoke acceptanceUCC guidelines govern right to exercise particular options post-inspectionBuyers/lessees must give reasonable notice upon exercising right of rejection/revocation of acceptance