- Consolidated Laws - Uniform Commercial Code
PART 5
PERFORMANCE
Section 2--501. Insurable Interest in Goods; Manner of Identification of
Goods.
(1) The buyer obtains a special property and an insurable interest in
goods by identification of existing goods as goods to which the contract
refers even though the goods so identified are non-conforming and he has
an option to return or reject them. Such identification can be made at
any time and in any manner explicitly agreed to by the parties. In the
absence of explicit agreement identification occurs
(a) when the contract is made if it is for the sale of goods
already existing and identified;
(b) if the contract is for the sale of future goods other than
those described in paragraph (c), when goods are shipped,
marked or otherwise designated by the seller as goods to
which the contract refers;
(c) when the crops are planted or otherwise become growing crops
or the young are conceived if the contract is for the sale of
unborn young to be born within twelve months after
contracting or for the sale of crops to be harvested within
twelve months or the next normal harvest season after
contracting whichever is longer.
(2) The seller retains an insurable interest in goods so long as title
to or any security interest in the goods remains in him and where the
identification is by the seller alone he may until default or insolvency
or notification to the buyer that the identification is final substitute
other goods for those identified.
(3) Nothing in this section impairs any insurable interest recognized
under any other statute or rule of law.
Section 2--502. Buyer`s Right to Goods on Seller`s Repudiation, Failure
to Deliver, or Insolvency.
(1) Subject to subsections (2) and (3) and even though the goods have
not been shipped a buyer who has paid a part or all of the price of
goods in which he has a special property under the provisions of the
immediately preceding section may on making and keeping good a tender of
any unpaid portion of their price recover them from the seller if:
(a) in the case of goods bought for personal, family, or
household purposes, the seller repudiates or fails to deliver
as required by the contract; or
(b) in all cases, the seller becomes insolvent within ten days
after receipt of the first installment on their price.
(2) The buyer`s right to recover the goods under paragraph (a) of
subsection (1) vests upon acquisition of a special property, even if the
seller had not then repudiated or failed to deliver.
(3) If the identification creating his special property has been made
by the buyer he acquires the right to recover the goods only if they
conform to the contract for sale.
Section 2--503. Manner of Seller`s Tender of Delivery.
(1) Tender of delivery requires that the seller put and hold
conforming goods at the buyer`s disposition and give the buyer any
notification reasonably necessary to enable him to take delivery. The
manner, time and place for tender are determined by the agreement and
this Article, and in particular
(a) tender must be at a reasonable hour, and if it is of goods
they must be kept available for the period reasonably
necessary to enable the buyer to take possession; but
(b) unless otherwise agreed the buyer must furnish facilities
reasonably suited to the receipt of the goods.
(2) Where the case is within the next section respecting shipment
tender requires that the seller comply with its provisions.
(3) Where the seller is required to deliver at a particular
destination tender requires that he comply with subsection (1) and also
in any appropriate case tender documents as described in subsections (4)
and (5) of this section.
(4) Where goods are in the possession of a bailee and are to be
delivered without being moved
(a) tender requires that the seller either tender a negotiable
document of title covering such goods or procure
acknowledgment by the bailee of the buyer`s right to
possession of the goods; but
(b) tender to the buyer of a non-negotiable document of title or
of a written direction to the bailee to deliver is sufficient
tender unless the buyer seasonably objects, and receipt by
the bailee of notification of the buyer`s rights fixes those
rights as against the bailee and all third persons; but risk
of loss of the goods and of any failure by the bailee to
honor the non-negotiable document of title or to obey the
direction remains on the seller until the buyer has had a
reasonable time to present the document or direction, and a
refusal by the bailee to honor the document or to obey the
direction defeats the tender.
(5) Where the contract requires the seller to deliver documents
(a) he must tender all such documents in correct form, except as
provided in this Article with respect to bills of lading in a
set (subsection (2) of Section 2--323); and
(b) tender through customary banking channels is sufficient and
dishonor of a draft accompanying the documents constitutes
non-acceptance or rejection.
Section 2--504. Shipment by Seller.
Where the seller is required or authorized to send the goods to the
buyer and the contract does not require him to deliver them at a
particular destination, then unless otherwise agreed he must
(a) put the goods in the possession of such a carrier and make such a
contract for their transportation as may be reasonable having regard to
the nature of the goods and other circumstances of the case; and
(b) obtain and promptly deliver or tender in due form any document
necessary to enable the buyer to obtain possession of the goods or
otherwise required by the agreement or by usage of trade; and
(c) promptly notify the buyer of the shipment.
Failure to notify the buyer under paragraph (c) or to make a proper
contract under paragraph (a) is a ground for rejection only if material
delay or loss ensues.
Section 2--505. Seller`s Shipment Under Reservation.
(1) Where the seller has identified goods to the contract by or before
shipment:
(a) his procurement of a negotiable bill of lading to his own
order or otherwise reserves in him a security interest in the
goods. His procurement of the bill to the order of a
financing agency or of the buyer indicates in addition only
the seller`s expectation of transferring that interest to the
person named.
(b) a non-negotiable bill of lading to himself or his nominee
reserves possession of the goods as security but except in a
case of conditional delivery (subsection (2) of Section
2--507) a non-negotiable bill of lading naming the buyer as
consignee reserves no security interest even though the
seller retains possession of the bill of lading.
(2) When shipment by the seller with reservation of a security
interest is in violation of the contract for sale it constitutes an
improper contract for transportation within the preceding section but
impairs neither the rights given to the buyer by shipment and
identification of the goods to the contract nor the seller`s powers as a
holder of a negotiable document.
Section 2--506. Rights of Financing Agency.
(1) A financing agency by paying or purchasing for value a draft which
relates to a shipment of goods acquires to the extent of the payment or
purchase and in addition to its own rights under the draft and any
document of title securing it any rights of the shipper in the goods
including the right to stop delivery and the shipper`s right to have the
draft honored by the buyer.
(2) The right to reimbursement of a financing agency which has in good
faith honored or purchased the draft under commitment to or authority
from the buyer is not impaired by subsequent discovery of defects with
reference to any relevant document which was apparently regular on its
face.
Section 2--507. Effect of Seller`s Tender; Delivery on Condition.
(1) Tender of delivery is a condition to the buyer`s duty to accept
the goods and, unless otherwise agreed, to his duty to pay for them.
Tender entitles the seller to acceptance of the goods and to payment
according to the contract.
(2) Where payment is due and demanded on the delivery to the buyer of
goods or documents of title, his right as against the seller to retain
or dispose of them is conditional upon his making the payment due.
Section 2--508. Cure by Seller of Improper Tender or Delivery;
Replacement.
(1) Where any tender or delivery by the seller is rejected because
non-conforming and the time for performance has not yet expired, the
seller may seasonably notify the buyer of his intention to cure and may
then within the contract time make a conforming delivery.
(2) Where the buyer rejects a non-conforming tender which the seller
had reasonable grounds to believe would be acceptable with or without
money allowance the seller may if he seasonably notifies the buyer have
a further reasonable time to substitute a conforming tender.
Section 2--509. Risk of Loss in the Absence of Breach.
(1) Where the contract requires or authorizes the seller to ship the
goods by carrier
(a) if it does not require him to deliver them at a particular
destination, the risk of loss passes to the buyer when the
goods are duly delivered to the carrier even though the
shipment is under reservation (Section 2--505); but
(b) if it does require him to deliver them at a particular
destination and the goods are there duly tendered while in
the possession of the carrier, the risk of loss passes to the
buyer when the goods are there duly so tendered as to enable
the buyer to take delivery.
(2) Where the goods are held by a bailee to be delivered without being
moved, the risk of loss passes to the buyer
(a) on his receipt of a negotiable document of title covering the
goods; or
(b) on acknowledgment by the bailee of the buyer`s right to
possession of the goods; or
(c) after his receipt of a non-negotiable document of title or
other written direction to deliver, as provided in subsection
(4) (b) of Section 2--503.
(3) In any case not within subsection (1) or (2), the risk of loss
passes to the buyer on his receipt of the goods if the seller is a
merchant; otherwise the risk passes to the buyer on tender of delivery.
(4) The provisions of this section are subject to contrary agreement
of the parties and to the provisions of this Article on sale on approval
(Section 2--327) and on effect of breach on risk of loss (Section
2--510).
Section 2--510. Effect of Breach on Risk of Loss.
(1) Where a tender or delivery of goods so fails to conform to the
contract as to give a right of rejection the risk of their loss remains
on the seller until cure or acceptance.
(2) Where the buyer rightfully revokes acceptance he may to the extent
of any deficiency in his effective insurance coverage treat the risk of
loss as having rested on the seller from the beginning.
(3) Where the buyer as to conforming goods already identified to the
contract for sale repudiates or is otherwise in breach before risk of
their loss has passed to him, the seller may to the extent of any
deficiency in his effective insurance coverage treat the risk of loss as
resting on the buyer for a commercially reasonable time.
Section 2--511. Tender of Payment by Buyer; Payment by Check.
(1) Unless otherwise agreed tender of payment is a condition to the
seller`s duty to tender and complete any delivery.
(2) Tender of payment is sufficient when made by any means or in any
manner current in the ordinary course of business unless the seller
demands payment in legal tender and gives any extension of time
reasonably necessary to procure it.
(3) Subject to the provisions of this Act on the effect of an
instrument on an obligation (Section 3--802), payment by check is
conditional and is defeated as between the parties by dishonor of the
check on due presentment.
Section 2--512. Payment by Buyer Before Inspection.
(1) Where the contract requires payment before inspection
non-conformity of the goods does not excuse the buyer from so making
payment unless
(a) the non-conformity appears without inspection; or
(b) despite tender of the required documents the circumstances
would justify injunction against honor under this Code (Section
5--109(b)).
(2) Payment pursuant to subsection (1) does not constitute an
acceptance of goods or impair the buyer`s right to inspect or any of his
remedies.
Section 2--513. Buyer`s Right to Inspection of Goods.
(1) Unless otherwise agreed and subject to subsection (3), where goods
are tendered or delivered or identified to the contract for sale, the
buyer has a right before payment or acceptance to inspect them at any
reasonable place and time and in any reasonable manner. When the seller
is required or authorized to send the goods to the buyer, the inspection
may be after their arrival.
(2) Expenses of inspection must be borne by the buyer but may be
recovered from the seller if the goods do not conform and are rejected.
(3) Unless otherwise agreed and subject to the provisions of this
Article on C.I.F. contracts (subsection (3) of Section 2--321), the
buyer is not entitled to inspect the goods before payment of the price
when the contract provides
(a) for delivery "C.O.D." or on other like terms; or
(b) for payment against documents of title, except where such
payment is due only after the goods are to become available
for inspection.
(4) A place or method of inspection fixed by the parties is presumed
to be exclusive but unless otherwise expressly agreed it does not
postpone identification or shift the place for delivery or for passing
the risk of loss. If compliance becomes impossible, inspection shall be
as provided in this section unless the place or method fixed was clearly
intended as an indispensable condition failure of which avoids the
contract.
Section 2--514. When Documents Deliverable on Acceptance; When on
Payment.
Unless otherwise agreed documents against which a draft is drawn are
to be delivered to the drawee on acceptance of the draft if it is
payable more than three days after presentment; otherwise, only on
payment.
Section 2--515. Preserving Evidence of Goods in Dispute.
In furtherance of the adjustment of any claim or dispute
(a) either party on reasonable notification to the other and for the
purpose of ascertaining the facts and preserving evidence has the right
to inspect, test and sample the goods including such of them as may be
in the possession or control of the other; and
(b) the parties may agree to a third party inspection or survey to
determine the conformity or condition of the goods and may agree that
the findings shall be binding upon them in any subsequent litigation or
adjustment.
