- Consolidated Laws - Uniform Commercial Code
PART 6
BREACH, REPUDIATION AND EXCUSE
Section 2--601. Buyer`s Rights on Improper Delivery.
Subject to the provisions of this Article on breach in installment
contracts (Section 2--612) and unless otherwise agreed under the
sections on contractual limitations of remedy (Sections 2--718 and
2--719), if the goods or the tender of delivery fail in any respect to
conform to the contract, the buyer may
(a) reject the whole; or
(b) accept the whole; or
(c) accept any commercial unit or units and reject the rest.
Section 2--602. Manner and Effect of Rightful Rejection.
(1) Rejection of goods must be within a reasonable time after their
delivery or tender. It is ineffective unless the buyer seasonably
notifies the seller.
(2) Subject to the provisions of the two following sections on
rejected goods (Sections 2--603 and 2--604).
(a) after rejection any exercise of ownership by the buyer with
respect to any commercial unit is wrongful as against the
seller; and
(b) if the buyer has before rejection taken physical possession
of goods in which he does not have a security interest under
the provisions of this Article (subsection (3) of Section
2--711), he is under a duty after rejection to hold them with
reasonable care at the seller`s disposition for a time
sufficient to permit the seller to remove them; but
(c) the buyer has no further obligations with regard to goods
rightfully rejected.
(3) The seller`s rights with respect to goods wrongfully rejected are
governed by the provisions of this Article on seller`s remedies in
general (Section 2--703).
Section 2--603. Merchant Buyer`s Duties as to Rightfully Rejected Goods.
(1) Subject to any security interest in the buyer (subsection (3) of
Section 2--711), when the seller has no agent or place of business at
the market of rejection a merchant buyer is under a duty after rejection
of goods in his possession or control to follow any reasonable
instructions received from the seller with respect to the goods and in
the absence of such instructions to make reasonable efforts to sell them
for the seller`s account if they are perishable or threaten to decline
in value speedily. Instructions are not reasonable if on demand
indemnity for expenses is not forthcoming.
(2) When the buyer sells goods under subsection (1), he is entitled to
reimbursement from the seller or out of the proceeds for reasonable
expenses of caring for and selling them, and if the expenses include no
selling commission then to such commission as is usual in the trade or
if there is none to a reasonable sum not exceeding ten per cent on the
gross proceeds.
(3) In complying with this section the buyer is held only to good
faith and good faith conduct hereunder is neither acceptance nor
conversion nor the basis of an action for damages.
Section 2--604. Buyer`s Options as to Salvage of Rightfully Rejected
Goods.
Subject to the provisions of the immediately preceding section on
perishables if the seller gives no instructions within a reasonable time
after notification of rejection the buyer may store the rejected goods
for the seller`s account or reship them to him or resell them for the
seller`s account with reimbursement as provided in the preceding
section. Such action is not acceptance or conversion.
Section 2--605. Waiver of Buyer`s Objections by Failure to
Particularize.
(1) The buyer`s failure to state in connection with rejection a
particular defect which is ascertainable by reasonable inspection
precludes him from relying on the unstated defect to justify rejection
or to establish breach
(a) where the seller could have cured it if stated seasonably; or
(b) between merchants when the seller has after rejection made a
request in writing for a full and final written statement of
all defects on which the buyer proposes to rely.
(2) Payment against documents made without reservation of rights
precludes recovery of the payment for defects apparent on the face of
the documents.
Section 2--606. What Constitutes Acceptance of Goods.
(1) Acceptance of goods occurs when the buyer
(a) after a reasonable opportunity to inspect the goods signifies
to the seller that the goods are conforming or that he will
take or retain them in spite of their non-conformity; or
(b) fails to make an effective rejection (subsection (1) of
Section 2--602), but such acceptance does not occur until the
buyer has had a reasonable opportunity to inspect them; or
(c) does any act inconsistent with the seller`s ownership; but if
such act is wrongful as against the seller it is an
acceptance only if ratified by him.
(2) Acceptance of a part of any commercial unit is acceptance of that
entire unit.
Section 2--607. Effect of Acceptance; Notice of Breach; Burden of
Establishing Breach After Acceptance; Notice of Claim
or Litigation to Person Answerable Over.
(1) The buyer must pay at the contract rate for any goods accepted.
(2) Acceptance of goods by the buyer precludes rejection of the goods
accepted and if made with knowledge of a non-conformity cannot be
revoked because of it unless the acceptance was on the reasonable
assumption that the non-conformity would be seasonably cured but
acceptance does not of itself impair any other remedy provided by this
Article for non-conformity.
(3) Where a tender has been accepted
(a) the buyer must within a reasonable time after he discovers or
should have discovered any breach notify the seller of breach
or be barred from any remedy; and
(b) if the claim is one for infringement or the like (subsection
(3) of Section 2--312) and the buyer is sued as a result of
such a breach he must so notify the seller within a
reasonable time after he receives notice of the litigation or
be barred from any remedy over for liability established by
the litigation.
(4) The burden is on the buyer to establish any breach with respect to
the goods accepted.
(5) Where the buyer is sued for breach of a warranty or other
obligation for which his seller is answerable over
(a) he may give his seller written notice of the litigation. If
the notice states that the seller may come in and defend and
that if the seller does not do so he will be bound in any
action against him by his buyer by any determination of fact
common to the two litigations, then unless the seller after
seasonable receipt of the notice does come in and defend he
is so bound.
(b) if the claim is one for infringement or the like (subsection
(3) of Section 2--312) the original seller may demand in
writing that his buyer turn over to him control of the
litigation including settlement or else be barred from any
remedy over and if he also agrees to bear all expense and to
satisfy any adverse judgment, then unless the buyer after
seasonable receipt of the demand does turn over control the
buyer is so barred.
(6) The provisions of subsections (3), (4) and (5) apply to any
obligation of a buyer to hold the seller harmless against infringement
or the like (subsection (3) of Section 2--312).
Section 2--608. Revocation of Acceptance in Whole or in Part.
(1) The buyer may revoke his acceptance of a lot or commercial unit
whose non-conformity substantially impairs its value to him if he has
accepted it
(a) on the reasonable assumption that its non-conformity would be
cured and it has not been seasonably cured; or
(b) without discovery of such non-conformity if his acceptance
was reasonably induced either by the difficulty of discovery
before acceptance or by the seller`s assurances.
(2) Revocation of acceptance must occur within a reasonable time after
the buyer discovers or should have discovered the ground for it and
before any substantial change in condition of the goods which is not
caused by their own defects. It is not effective until the buyer
notifies the seller of it.
(3) A buyer who so revokes has the same rights and duties with regard
to the goods involved as if he had rejected them.
Section 2--609. Right to Adequate Assurance of Performance.
(1) A contract for sale imposes an obligation on each party that the
other`s expectation of receiving due performance will not be impaired.
When reasonable grounds for insecurity arise with respect to the
performance of either party the other may in writing demand adequate
assurance of due performance and until he receives such assurance may if
commercially reasonable suspend any performance for which he has not
already received the agreed return.
(2) Between merchants the reasonableness of grounds for insecurity and
the adequacy of any assurance offered shall be determined according to
commercial standards.
(3) Acceptance of any improper delivery or payment does not prejudice
the aggrieved party`s right to demand adequate assurance of future
performance.
(4) After receipt of a justified demand failure to provide within a
reasonable time not exceeding thirty days such assurance of due
performance as is adequate under the circumstances of the particular
case is a repudiation of the contract.
Section 2--610. Anticipatory Repudiation.
When either party repudiates the contract with respect to a
performance not yet due the loss of which will substantially impair the
value of the contract to the other, the aggrieved party may
(a) for a commercially reasonable time await performance by the
repudiating party; or
(b) resort to any remedy for breach (Section 2--703 or Section
2--711), even though he has notified the repudiating party that he would
await the latter`s performance and has urged retraction; and
(c) in either case suspend his own performance or proceed in
accordance with the provisions of this Article on the seller`s right to
identify goods to the contract notwithstanding breach or to salvage
unfinished goods (Section 2--704).
Section 2--611. Retraction of Anticipatory Repudiation.
(1) Until the repudiating party`s next performance is due he can
retract his repudiation unless the aggrieved party has since the
repudiation cancelled or materially changed his position or otherwise
indicated that he considers the repudiation final.
(2) Retraction may be by any method which clearly indicates to the
aggrieved party that the repudiating party intends to perform, but must
include any assurance justifiably demanded under the provisions of this
Article (Section 2--609).
(3) Retraction reinstates the repudiating party`s rights under the
contract with due excuse and allowance to the aggrieved party for any
delay occasioned by the repudiation.
Section 2--612. "Installment Contract"; Breach.
(1) An "installment contract" is one which requires or authorizes the
delivery of goods in separate lots to be separately accepted, even
though the contract contains a clause "each delivery is a separate
contract" or its equivalent.
(2) The buyer may reject any installment which is non-conforming if
the non-conformity substantially impairs the value of that installment
and cannot be cured or if the non-conformity is a defect in the required
documents; but if the non-conformity does not fall within subsection (3)
and the seller gives adequate assurance of its cure the buyer must
accept that installment.
(3) Whenever non-conformity or default with respect to one or more
installments substantially impairs the value of the whole contract there
is a breach of the whole. But the aggrieved party reinstates the
contract if he accepts a non-conforming installment without seasonably
notifying of cancellation or if he brings an action with respect only to
past installments or demands performance as to future installments.
Section 2--613. Casualty to Identified Goods.
Where the contract requires for its performance goods identified when
the contract is made, and the goods suffer casualty without fault of
either party before the risk of loss passes to the buyer, or in a proper
case under a "no arrival, no sale" term (Section 2--324) then
(a) if the loss is total the contract is avoided; and
(b) if the loss is partial or the goods have so deteriorated as no
longer to conform to the contract the buyer may nevertheless demand
inspection and at his option either treat the contract as avoided or
accept the goods with due allowance from the contract price for the
deterioration or the deficiency in quantity but without further right
against the seller.
Section 2--614. Substituted Performance.
(1) Where without fault of either party the agreed berthing, loading,
or unloading facilities fail or an agreed type of carrier becomes
unavailable or the agreed manner of delivery otherwise becomes
commercially impracticable but a commercially reasonable substitute is
available, such substitute performance must be tendered and accepted.
(2) If the agreed means or manner of payment fails because of domestic
or foreign governmental regulation, the seller may withhold or stop
delivery unless the buyer provides a means or manner of payment which is
commercially a substantial equivalent. If delivery has already been
taken, payment by the means or in the manner provided by the regulation
discharges the buyer`s obligation unless the regulation is
discriminatory, oppressive or predatory.
Section 2--615. Excuse by Failure of Presupposed Conditions.
Except so far as a seller may have assumed a greater obligation and
subject to the preceding section on substituted performance:
(a) Delay in delivery or non-delivery in whole or in part by a seller
who complies with paragraphs (b) and (c) is not a breach of his duty
under a contract for sale if performance as agreed has been made
impracticable by the occurrence of a contingency the non-occurrence of
which was a basic assumption on which the contract was made or by
compliance in good faith with any applicable foreign or domestic
governmental regulation or order whether or not it later proves to be
invalid.
(b) Where the causes mentioned in paragraph (a) affect only a part of
the seller`s capacity to perform, he must allocate production and
deliveries among his customers but may at his option include regular
customers not then under contract as well as his own requirements for
further manufacture. He may so allocate in any manner which is fair and
reasonable.
(c) The seller must notify the buyer seasonably that there will be
delay or non-delivery and, when allocation is required under paragraph
(b), of the estimated quota thus made available for the buyer.
Section 2--616. Procedure on Notice Claiming Excuse.
(1) Where the buyer receives notification of a material or indefinite
delay or an allocation justified under the preceding section he may by
written notification to the seller as to any delivery concerned, and
where the prospective deficiency substantially impairs the value of the
whole contract under the provisions of this Article relating to breach
of installment contracts (Section 2--612), then also as to the whole,
(a) terminate and thereby discharge any unexecuted portion of the
contract; or
(b) modify the contract by agreeing to take his available quota
in substitution.
(2) If after receipt of such notification from the seller the buyer
fails so to modify the contract within a reasonable time not exceeding
thirty days the contract lapses with respect to any deliveries affected.
(3) The provisions of this section may not be negated by agreement
except in so far as the seller has assumed a greater obligation under
the preceding section.
