Remedies for Breach of Sales and Lease Contracts

Contract Law for Paralegals: Traditional and E-Contracts

© 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved

Remedies for Breach of Sales and Lease

ContractsChapter 12

Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved

Tender of Delivery

Transfer or delivery of goods to the buyer or lessee in accordance with sales or lease contract

Requires: Conforming goods to be put aside and held for

buyer or lessee Notification be made to buyer or lessee Goods must be tendered in single delivery

unless otherwise noted in contract Payment due upon delivery unless otherwise

noted


Place of Delivery

Contract usually states place and time of delivery

If contract silent, place is seller’s or buyer’s place of business

If they have no place of business, it is their residence


Place of Delivery (continued)

If goods at warehouse and are to be delivered without being moved, delivery occurs when seller: Tenders buyer negotiable document of

title Produces acknowledgement from

bailee of buyer’s right of possession Tenders nonnegotiable document of

title or written direction to bailee to deliver goods to buyer


Delivery in Carrier Cases Shipment Contracts

Do not name destination Seller must put goods in carrier’s possession and

contract for delivery Obtain and deliver all documents necessary for

buyer to obtain possession Notify buyer of shipment

Destination Contracts Names destination Delivery must be made at reasonable time

and in reasonable manner


Perfect Tender Rule If goods fail to conform,

buyer/lessee may: Reject entire shipment Accept whole shipment, or Reject part and accept part


Exceptions

Agreement of Parties Parties may contract to limit perfect tender

rule Defective or nonconforming goods may be rejected Seller/lessor may replace nonconforming goods Buyer/lessee accepts nonconforming goods with

compensation

Substitution of Carriers Commercially reasonable carrier may be

substituted if agreed-upon delivery manner fails or becomes unavailable


Cure

UCC gives seller/lessor opportunity to cure time has not expired must notify buyer/lessee of intentions


Installment Contract

Goods delivered and accepted at different times

Requires specific knowledge Seller can only reject entire

contract if default impairs value of entire contract

Seller can reject non-conforming shipments


Destruction of Goods

Contract void If goods are totally destroyed through no fault

of either party before risk of loss passes Both parties excused from performance

Contract voidable If goods are partially destroyed through no

fault of either party before risk of loss passes Buyer may inspect goods and choose to void

the contract


Buyer’s and Lessee’s Performance Once seller/lessee has tendered

delivery, buyer/lessee is obligated to accept and pay as per sales/lease contract.

If contract silent, UCC controls.


Right of Inspection

Buyer has the right to inspect goods before paying for them

Buyer may reject nonconforming goods

Parties may agree as to time and place of inspection

If contract silent, inspection must occur at reasonable time and place


Payment

Due from buyer when and where goods delivered

Contract may set terms Can be paid in any manner

acceptable in ordinary course of business

If cash required, buyer must be given an extension to secure cash


Acceptance

Contract is created when the offeree sends an acceptance to the offeror, not when the offeror receives the acceptance.

The UCC permits acceptance by any reasonable manner or method of communication.

Acceptance occurs if buyer acts inconsistently with seller’s ownership rights.

Buyers/lessees must accept “commercial unit”.


Revocation of Acceptance

Buyer can revoke acceptance if: Goods are non-conforming The nonconformity substantially impairs the

value of the goods The seller’s promise to timely cure is not met Goods were accepted before non-conformity

was discovered and the nonconformity was difficult to discover

The goods were accepted before the nonconformity was discovered and the seller/lessor assured the buyer/lessee that the goods were conforming


Right to Withhold Delivery

Delivery of goods may be withheld if: Seller/lessor is in possession of goods when

buyer/lessee breaches contract Buyer/lessee fails to make payment when due Buyer/lessee repudiates contract

If part of the shipment has been delivered at time of breach, seller/lessor may withhold delivery of remainder.

If seller/lessor discovers that buyer/lessee is insolvent, they may require cash payment.


Right to Stop Goods in Transit Seller/lessor may stop shipment in

transit if: He discovers buyer’s/lessee’s

insolvency Buyer/lessee repudiates shipment Buyer/lessee fails to make

payment when due Seller/lessor must give sufficient

notice to allow bailee to prevent delivery


Right to Reclaim Goods

Seller/lessor may reclaim goods if: The buyer misrepresented their

solvency in writing within 3 months before delivery

Paid for goods with a check that bounced

If the lessee is in default of the contract


Right to Dispose of Goods Must be made in good faith Seller/lessor must give notice to

buyer/lessee of intention Notice not required with

perishable goods or goods that will quickly decline in value

Seller/lessor may recover damages

Profit does not revert to original buyer


Right to Recover the Purchase Price or Rent

Seller/lessor may sue to recover if: Buyer/lessee fails to pay as due Buyer/lessee breaches contract after

goods have been identified and seller/lessor cannot resell or dispose of them

Goods are damaged or lost after risk passes to buyer/lessee


Additional Rights

Seller/lessor may sue to recover damages caused by buyer’s or lessee’s breach.

Seller/lessor may recover lost profits.

Seller/lessor may cancel contract if buyer/lessee breaches.


Buyer’s and Lessee’s Remedies

Buyer may reject nonconforming goods or improperly tendered goods. May reject the whole, accept the whole, or

accept any commercial unit and reject the rest Must reject within a reasonable time period. Must follow reasonable instructions for return

of goods. If goods are perishable, must make

reasonable effort to sell them on seller’s behalf.

Buyer entitled to reimbursement for shipping, holding, storage expenses.


Buyer’s and Lessee’s Remedies (continued)

If buyer makes full or partial payment before goods are received and seller/lessor becomes insolvent within ten days of receiving payment, they can recover goods .

If goods are unique, buyer can obtain specific performance

Buyer/lessor may cover. Buyer/lessee has right to replevy goods,

if they are wrongfully withheld.


Buyer’s and Lessee’s Remedies (continued)

Buyer/lessee may cancel contract if seller/lessor fails to deliver conforming goods or repudiates contract Buyer/lessee may recover damages

Buyer/lessee may recover damages for accepted nonconforming goods

Buyer/lessee may recover damages for loss from seller’s breach


Additional Performance Issues Assurance of

Performance An adequate assurance of

due performance may be demanded in writing by either party.


Anticipatory Repudiation

Occurs when a party repudiates the contract before performance is required.

Wavering is not sufficient. Aggrieved party may:

Await performance for a commercially reasonable time.

Treat contract as breached at time of anticipatory repudiation.

Indicate repudiation is considered final.


Statute of Limitations The UCC provides that an

action for breach of any written or oral sales or lease contract must commence within four years after the cause of the action accrues.


Agreements Affecting Remedies Parties may agree to remedies in

addition to those available under the UCC.

UCC allows for liquidated damages as a substitute for actual damages.

Remedies for Breach of Sales and Lease Contracts

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