Sale of Goods and UCC Remedies: Rejection, Revocation, Nonconforming Goods, Cover, Seller's Right to Cure

Description

The last two years have rattled the economy, and many businesses face difficulties honoring contracts. When contracts involve the sale of goods, counsel must consider Article 2 of the UCC to amend agreements during these uncertain times.

The UCC gives a buyer a right to inspect goods before accepting or paying for them, and a buyer is not required to pay for goods that they do not accept. More specifically, before making payment, the buyer has the right to inspect the goods "at any reasonable place and time and in any reasonable manner." Buyers have two options--rejection, which occurs before a buyer accepts the goods--versus revocation, which refers to situations where a buyer has already taken the goods.

The UCC gives buyers the right to revoke acceptance of goods only in narrow circumstances. Those circumstances include when a buyer accepts nonconforming goods on a reasonable assumption the seller will promptly cure the nonconformity, or a buyer initially accepts goods without discovering nonconformity because of difficulty or the seller's assurances.

As opposed to the UCC, general contract law allows for a party to fulfill contractual obligations through substantial performance. This means that it may suffice if a party substantially, though not perfectly, meets the contract's requirements. However, the UCC requires "perfect tender" by the seller. As mentioned above, tender means, in essence, the delivery of goods to the buyer, and perfect tender means delivering goods that precisely meet the terms of the contract. According to the UCC, if the goods as tendered "fail in any respect to conform to the contract," the buyer has various options, including rejecting the goods.

The UCC gives a seller the right to cure goods delivered to a buyer that are defective or nonconforming. In other words, if a seller delivers goods that don't match the contract and the buyer rejects those goods, the UCC allows the seller to fix the problem. The seller has the right to cure when the buyer refuses goods because of nonconformity, and the seller still has time under the contract to provide conforming goods; or where the seller had reasonable grounds to believe the nonconforming goods delivered would be acceptable, with or without a money allowance.

Listen as our expert panel discusses the remedies available under the UCC for buyers and sellers, explains how to implement those remedies, and offers best practices to amend contract terms to address the most costly and burdensome requirements under the UCC.